January 2026 Business Update for Birmingham SMEs

As Birmingham accountants committed to supporting local businesses, we know that January can feel like a reset button: full of ambition, planning and pressure to make things happen. In this January 2026 business update, we highlight key changes that could affect your strategy and compliance this year – from dividend tax increases and Making Tax Digital milestones, to payroll reforms and a surprising VAT tribunal involving rotisserie chickens.

If any of the topics covered raise questions for your business, our Edgbaston-based team of Birmingham accountants is here to help.

Looking Ahead in 2026: Reflections for Business Owners

Now that 2026 is underway, many business owners are reflecting on how 2025 unfolded.

Perhaps you experienced rapid growth from a new revenue stream, or built strong client relationships that exceeded expectations. Alternatively, you may have faced challenges – including rising costs, skills shortages, or evolving customer demands.

Questions worth considering include:

• Did your business grow in line with your personal and financial goals?

• Did it give you the time, flexibility, or capacity to pursue new opportunities?

As leading Edgbaston accountants, we recommend using January to consider what worked well last year – and what could be improved in 2026.

Build on What Worked in 2025

• Which services or products delivered the highest ROI?

• Which client segments added the most value?

• What internal weaknesses (e.g. recruitment or cash flow) need addressing?

These insights can help shape your 2026 strategy – whether you are scaling, consolidating, or simply staying resilient.

Set Your 2026 Business Goals

You may be planning to:

• Expand into new markets

• Recruit key staff

• Invest in new systems or automation

Alternatively, your focus may be to consolidate the gains from 2025 and streamline operations. Either way, the Barnett Ravenscroft team is here to support you through every stage.

Dividend Tax Rates Are Rising in April 2026 – What It Means for You

From April 2026, dividend tax rates will increase:

• Ordinary rate: 8.75% → 10.75%

• Upper rate: 33.75% → 35.75%

• Additional rate: stays at 39.35%

• Dividend allowance: remains at £500

This change may affect how you extract profits from your limited company. As experienced Birmingham tax accountants, we recommend reviewing:

• Your mix of salary vs dividends

• Whether bringing dividends forward is beneficial before April

• The cash flow impact of adjusting remuneration strategies

Our team can help you create a tailored, tax-efficient approach to remuneration in 2026/27.

Making Tax Digital for Income Tax – The Latest 2026 Update

MTD for Income Tax becomes mandatory for many sole traders and landlords from April 2026. However, there are several easements and deferrals:

• No late filing penalties for quarterly updates in 2026/27

• SA109 taxpayers deferred until April 2027

• Additional groups deferred until April 2027:

  • Trust and estate income recipients

  • Farmers and creative artists using averaging

  • Qualifying care income recipients

  • Non-UK resident entertainers or athletes

Those under deputyship are exempt entirely.

Need help preparing for MTD? As trusted Birmingham accountants, we can help you adopt compatible software or handle your quarterly submissions.

Homeworking Expenses – Changes from April 2026

From 6 April 2026, employees can no longer claim flat-rate homeworking expense deductions (e.g. £6/week) through their self-assessment.

Employers can still reimburse genuine, necessary homeworking costs tax-free – but only when homeworking is a contractual requirement.

This is a significant change for businesses with hybrid or flexible working policies. Talk to our payroll specialists to review your employee expense procedures.

Payrolling of Benefits in Kind (BiKs) Becomes Mandatory in 2027

From April 2027, most employee benefits in kind will need to be payrolled in real-time (exceptions: living accommodation and low-interest loans).

This will change how employees are taxed on their benefits, so early communication is essential. Employees may feel they are “paying twice” in the transition year as older tax codes are corrected.

Start preparing your payroll systems now. We can guide you through BiK payrolling setup and employee messaging.

VAT Tribunal: Are Hot Chickens Really Tax-Free?

A curious VAT ruling recently hit the headlines. In WM Morrison v HMRC, the tribunal ruled that rotisserie chickens are hot takeaway food, and therefore subject to VAT at 20% – even though they were not advertised as hot.

The key issue? The packaging retained heat too effectively. This ruling reminds all food retailers and caterers how complex VAT law can be.

If you are unsure how VAT applies to your goods or services, speak to our VAT experts today.

Need Support in 2026? Your Birmingham Accountants Are Here to Help

Whether you are planning dividend withdrawals, transitioning to Making Tax Digital, reviewing your payroll compliance, or seeking strategic financial advice – Barnett Ravenscroft is here to support you in 2026.

We are proud to be Edgbaston-based accountants trusted by Birmingham businesses for our clarity, experience and attention to detail.

Contact us today to book a conversation and get your year off to a confident start.