Nov 21, 2025 Accountants & Bookkeepers
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Navigating the Autumn Budget fallout
The Autumn Budget, delivered today by Chancellor Rachel Reeves, marks the opening chapter of the 2026/27 tax year. For accountants and bookkeepers, the political headlines must immediately translate into a compliance and advisory roadmap. Our primary task is no longer just reporting on the past, but ensuring our clients are compliant and financially prepared for the changes coming in April 2026.
Here is your breakdown of the key measures and the critical steps you must take now, including a crucial reminder on Making Tax Digital for Income Tax (MTD for IT).
The rising cost of employment: wage changes
The most immediate and administrative challenge for business clients stems from the confirmed increase to the statutory wage floor.
The National Living Wage (NLW) for workers aged 21 and over is set to rise to £12.71 per hour from April 2026. This increase is mirrored across the lower age bands, with the minimum wage for 18- to 20-year-olds also seeing a notable jump. For many businesses, particularly those in the labour-intensive sectors such as hospitality, retail and care, this represents a major increase in operating costs.
Your client support imperative
Your payroll teams must immediately plan the system update for April 2026 to ensure full compliance. However, your advisory role extends beyond ticking the compliance box. You need to proactively model the impact of these wage hikes on your clients’ cash flow and overall profitability. This is the moment to help clients review their pricing strategies, operational efficiencies and staffing models to absorb the higher wage bill without compromising their long-term viability. Furthermore, a renewed focus on Full Expensing for capital purchases can help businesses offset some of this increased cost through immediate tax relief.
Fiscal drag: the stealth tax challenge
While there were no dramatic changes to headline Income Tax rates, the government’s continued reliance on fiscal drag represents the biggest long-term tax challenge for personal clients. The extension of the freeze on the Personal Allowance and the Higher Rate Threshold means that as wages naturally rise, more of your clients will be pulled into paying tax, or paying tax at the higher 40% rate, simply because the thresholds are not moving with inflation.
This is a time for clear communication. Clients need to understand why their tax bill may increase even if their gross pay has only risen modestly.
Now is the time to ensure all existing salary sacrifice schemes (which allow employees to benefit from National Insurance savings) are reviewed to reflect any potential rule changes announced in the fine print of the Budget documentation.
The urgent reminder: stop ignoring MTD for IT
Amidst the Budget headlines, it is vital that the accounting community does not allow clients to continue ignoring the looming deadline for Making Tax Digital for Income Tax (MTD for IT).
The key compliance date for the first tranche of clients – sole traders and landlords with an income over £50,000 is 6 April 2026.
We are now less than six months away from the mandatory start of digital record keeping and quarterly reporting. The single biggest bottleneck is the onboarding process to MTD-compatible software, which requires training, data migration and a fundamental change in client habits.
Your MTD call to action
You must pivot immediately to proactive MTD advisory:
- Identify and triage: immediately segment your client base to identify every sole trader and landlord who exceeded the £50,000 income threshold in the 2024/25 tax year. These are your priority “Tranche A” clients.
- Software Implementation: do not wait. Start the process of migrating these clients to a suitable MTD-compliant cloud accounting solution now. A staggered onboarding approach is critical to managing the firm’s workload.
- Communication & habit change: the compliance change is actually a shift from an annual data dump to a quarterly workflow. Educate your clients on the new rhythm of quarterly submissions and the annual submission to demystify the process and highlight the benefits of near real-time financial data.
For firms tackling the MTD for IT transition, leveraging external resources is key to an efficient rollout. Tools and compliance hubs developed by leading cloud software providers are invaluable for training and client communication.
We recommend focusing on structured support to facilitate a smooth digital transition. For example, platforms like the Xero MTD for IT hub offer comprehensive guides and resources to help you transition your clients and ensure compliance with the new quarterly reporting mandate.
The next digital frontier: e-Invoicing mandate
A significant development for business compliance was the announcement of e-invoicing in the UK for VAT invoices from 2029. Following the path of many global jurisdictions (including France, Spain and Poland), the government is moving to digitise transactions between businesses, requiring invoices to be issued and exchanged electronically via a structured format.
Why e-invoicing matters now
The move to mandatory e-invoicing is not just about compliance; it’s a massive shift towards efficiency and real-time data.
- Automation: e-invoices remove the need for manual data entry, reducing human error, accelerating reconciliation and speeding up payment cycles.
- Compliance certainty: because the invoices are generated in a structured digital format and potentially flow through a government-approved network, they provide a high degree of confidence in the audit trail.
- Real-time data: for accountants and bookkeepers, this means working with client data that is accurate and available almost instantly, enabling true real-time advisory services.
Your client action: prepare for structured data
This is a monumental shift that requires preparation now. While the mandate may start in 2029, the technology underpinning it must be in place.
The good news is that Xero already supports e-invoicing, allowing your clients to exchange invoices in compliant formats directly with trading partners who are also on the platform or using compatible systems. We urge you to start migrating clients to these systems now to ensure they are ahead of the mandate curve.
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