Why a Full Finance Function Is Your Secret Weapon for Scaling

Posted on September 3, 2025 by Sarah

Ambitious business owners are natural multitaskers. But when your limited company is pushing beyond £250k turnover, the DIY approach to finances stops being clever—and starts costing you.

A full finance function, like the one we deliver, means we handle everything:

Bookkeeping and VAT
Payroll and pension submissions
Director payments and dividend planning
Management accounts and board packs
Year-end compliance and tax optimisation

You stop wasting time chasing receipts or second-guessing your cash flow. Instead, you get back the brain space to focus on growing your business—with full clarity on where the money’s going and how to keep more of it.

💡 Tax Tip: Let’s say you’ve got surplus cash and want to extract it tax-efficiently. A full finance function tracks retained earnings, so we can time your dividend declarations and pension contributions to minimise higher-rate tax exposure. Done right, this can save you thousands annually in dividend tax.

Please contact us if you’d like to discuss your Finance tax planning then please contact us on 01386 366741 or email here and one of our advisers will be in contact.

AI vs Accountant

Posted on August 21, 2025 by Sarah

AI vs Accountant: Why Professional Advice Matters When Deciding Between a Sole Trader and a Limited Company

Artificial intelligence (AI) tools can crunch numbers in an instant, but they can’t replace the judgement of a chartered accountant—especially when it comes to choosing the right business structure.

In two recent LinkedIn posts I shared a real example from my practice: an enquiry from Jane, a soletrader making around £60,000 profit. She was wondering if she should incorporate to save tax. I fed the same numbers into an AI calculator and discovered a series of mistakes. This blog summarises what happened, sets the record straight with the latest tax rules and shows why relying solely on AI can cost you.

Jane’s Question: Should I Go Limited?

Jane’s friend said that she would “save tax by going limited”. On the face of it, the idea sounds plausible. After all, corporation tax on profits up to £50,000 is 19%, which is lower than the 2045 % bands for personal income tax. Limited companies also separate personal liability from business debt and often allow more flexibility to raise finance or share profits within a family.

Tax rules change constantly, and several factors can tip the scales. To illustrate this, I ran the numbers for Jane twice: once manually and once through an AI calculator. Here’s what I found.

How AI Got the Numbers Wrong

When I asked the AI tool to work out Jane’s tax bill as a sole trader versus a limited company for the 2025/26 tax year, it provided a neat set of figures—but they weren’t correct. The mistakes stemmed from using outdated thresholds and misunderstanding how different taxes and expenses work. Below are some highlights (or lowlights):

Employer’s National Insurance (NIC) threshold – The AI used the old £9,100 annual secondary threshold. From April 2025, employers start paying NIC at a much lower £5,000 threshold .
Employer’s NIC rate – It applied the historic 13.8 % rate instead of the current 15 % rate on earnings above the secondary threshold .
Accountancy fees as a posttax deduction – The calculator treated accountancy fees as an aftertax personal expense. In reality, they’re deductible business expenses that reduce taxable profit .
Class 4 National Insurance – It assumed a flat 6 % NIC on all profits over £12,570. For 2025/26, selfemployed people pay 6 % NIC only up to £50,270; profits above this are charged at 2 % .
Class 2 National Insurance – The tool still added Class 2 NIC. From April 2024, Class 2 NIC is no longer payable for selfemployed people with profits above the Lower Profits Limit .
Overall outcome – Most importantly, the AI concluded that incorporating would save Jane money. When I corrected the numbers using current rates and allowed for accountancy fees correctly, the result flipped: as a limited company director with a typical mix of salary and dividends, Jane would actually keep around £352 less than she would as a sole trader.
The AI’s calculation looked plausible but ignored the subtle changes to National Insurance thresholds and rates and mistreated expenses. It only came close to the right answer when I challenged it with followup questions.

A Reality Check: Sole Trader vs Limited Company at £60,000 Profit

Comparing Jane’s situation under both structures using the latest 2025/26 rates:

Item	Sole Trader	Limited Company
Profit before tax	£60,000	£60,000
Deductible accountancy fees	Deducted from profit before tax	Deducted from company profits
Taxes & NIC	Income tax at personal rates + Class 4 NIC (6 % to £50,270; 2 % thereafter)	Corporation tax at 19 % on profits; salary subject to employer NIC at 15 % and employee NIC; dividends taxed at lower rates
Net amount retained	≈ £45,705	≈ £45,353

The table shows that, at this profit level, there’s no immediate tax advantage in forming a limited company. The savings from the lower corporationtax rate are largely wiped out by higher employer NIC, administrative costs and the correct treatment of accountancy fees.

Beyond Tax: Other Factors to Consider

Tax isn’t the only consideration. Here are some other factors Jane (and anyone in a similar position) should weigh up:

Liability – A limited company is a separate legal entity, so you’re personally liable only for the amount you’ve invested . Sole traders are personally responsible for their business debts.
Funding and ownership – Companies can raise capital more easily by issuing shares and may attract investors . Sole traders rely on personal or business loans.
Administrative burden – Companies must submit annual accounts and corporationtax returns from the first pound of profit . Sole traders have a simpler selfassessment and can use cashbasis accounting .
Flexibility in sharing profits – Companies can distribute profits as dividends to shareholders, including family members, potentially reducing the family’s overall tax bill .
Future plans – For owners expecting to earn significantly more in future or raise external finance, incorporating might deliver longterm savings and growth opportunities despite higher shortterm costs.

Conclusion: Why You Still Need Professional Advice

AI tools can provide ballpark figures, but they often lag behind when tax rules change or when they’re required to interpret realworld complexities. In Jane’s case, an AI calculator not only used obsolete NIC thresholds and rates but also mishandled deductible expenses and underplayed the realworld result. If Jane had relied on the tool, she might have opted to incorporate unnecessarily and ended up paying more tax.

When it comes to AI vs Accountants there is no one size fits all answer to the sole trader vs limited company question. Profits, risk tolerance, growth plans and personal circumstances all play a part. A qualified accountant stays on top of legislative changes – such as the new £5,000 employer NIC threshold and 15 % rate , or the removal of Class 2 NIC – and can model how those changes affect your specific situation. Before making a decision that could impact your takehome pay and liability for years to come, always seek professional advice.

So to contact The Accountancy Office to discuss this more please click here or call us on 01386 366741

Changing Accountants

Posted on August 12, 2025 by Sarah

looking at changing accountants? A business will often have a need to change accountants. Having the right accountant is crucial for your financial health and peace of mind. Whether you’re a small business owner or an individual, your accountant plays a significant role in managing your finances, tax planning, and ensuring compliance with regulations. If you’re considering changing your accountant, it’s essential to approach the process methodically to ensure a smooth transition and continued financial stability.

Here’s a step-by-step guide to help you navigate this change effectively.

1: Assess Your Current Needs

Before making any changes, take a moment to evaluate your current needs. Ask yourself:

Are your accounting needs being met?
Do you feel your current accountant understands your business or personal financial goals?
Are communication and responsiveness issues?
Have there been any recent errors or concerns about the quality of service?

Understanding what you need from your accountant will help you find someone who better fits your requirements. Also consider timings. For example, if you’re mid-way through your financial year, you may wish to look for a new accountant closer to the end of the financial year to minimise disruption.

2: Research Potential Accountants

Once you have a clear understanding of your needs, start researching potential accountants. Consider the following:

Experience and Expertise: Look for accountants with experience in your industry or who specialize in your particular needs, whether personal finance, small business accounting, or corporate tax planning.
Reputation: Check online reviews, ask for recommendations from trusted colleagues or friends, and verify credentials and professional affiliations.
Services Offered: Ensure the prospective accountant offers the services you require, such as bookkeeping, tax preparation, financial planning, and advisory services.

3: Arrange Meetings

Narrow down your list to a few potential suitable matches and contact them for an initial telephone call or meeting. Prepare questions that will help you assess their fit for your needs, such as:

How do you stay updated with the latest tax laws and regulations?
What is your approach to communication and client updates?
How regularly will we speak?
How long does it typically take you to complete the type of work I need?

This step will help you gauge their expertise, communication style and ability to meet your expectations.

4: Evaluate Costs

Understanding the cost structure is vital to ensure it aligns with your budget. Discuss the following aspects:

Pricing models (hourly rates, fixed fees)
Any additional fees for specific services
How often billing occurs and preferred payment methods

While cost is important, it should be weighed against the value and quality of service provided and your needs.

5: Check Compatibility

Ensure that you and your potential accountant have a good rapport. This relationship should be based on trust and mutual understanding. Consider:

How comfortable you feel discussing sensitive financial information
Whether their communication style matches your preferences
If their values and business ethics align with yours

A good working relationship can lead to better financial outcomes and smoother collaboration.

6: Review Contract and Terms

Once you’ve chosen an accountant, carefully review the contract and terms of service. Ensure all services, fees, and expectations are clearly outlined. Don’t hesitate to ask for clarification on any point before signing.

7: Notify Your Current Accountant

Once you’ve finalised your decision, professionally notify your current accountant of your intention to switch. Review your contract to understand any notice periods or obligations. Request all necessary documents and ensure all outstanding invoices are settled.

8: Transfer Information

Your new accountant will work with your new accountant to transfer financial documents, tax records and any other necessary information. This transition should be seamless, with both parties coordinating to minimise disruption and it should only take a short amount of time.

Your new accountant will also set up the relevant authorisations with HMRC so that they can deal with your tax affairs on your behalf. They will also carry out anti-money laundering checks which they are legally required to do.

Changing accountants can seem daunting, but it’s crucial to ensuring your financial needs are met effectively. By following these steps, you can make an informed decision and find an accountant who aligns with your goals and supports your financial well-being. With the right partner, you can look forward to enhanced financial management and peace of mind.

Directors Turnover -How Much Should You Be Turning Over to Hit Your Personal Income Goal? (Most Directors Get This Wrong)

Posted on August 7, 2025 by Sarah

You’ve got a limited company, a growing business, and a personal income or directors turnover target in mind—maybe £60k, maybe £100k, maybe more.

But here’s the truth most directors miss:

There’s a massive difference between business profit and personal income. And if you don’t know the exact turnover your company needs to hit your goal, you’re probably overpaying tax – or worse, underpaying yourself.

That’s Where the Director’s Turnover & Tax Plan Calculator Comes In

Our bespoke calculator gives you total clarity. You input your personal income goal, and it shows you:

✅ The turnover your business needs to generate
✅ The pre-tax profit required to hit your target
✅ A full breakdown of income tax, dividend tax, National Insurance and Corporation Tax
✅ Your true effective tax rate
✅ A visual dashboard that ties it all together

No more guesstimates. No more pulling random numbers from your bank balance. Just solid, data-driven financial insight that helps you run your company like a director, not just a doer.

Why This Tool Matters

Most business owners aim for a round figure – like “I want to take home £60k”—but don’t know what that actually means in business performance terms.

If your business is VAT registered or has staff? That required turnover increases significantly.

VAT registered businesses collect 20% on top of their prices for HMRC – so only a portion of gross revenue is yours. If you employ staff, their wages, employer NIC (now 15%), pensions and payroll costs all reduce your profit before you even think about director pay.

Result? You need to generate a lot more in sales to safely and sustainably hit your personal income target.

Without this level of visibility, you’re likely to:

Underpay yourself (and wonder where all the profit went)
Overpay in tax (because you’re not extracting income smartly)
Miss out on planning opportunities (like pension contributions or salary tweaks)

Ready to Know Exactly What Your Business Needs to Earn?

Stop guessing. Start planning like a director.

Calculate your required turnover
Plan your salary + dividends strategically
Understand your total tax burden
Save time, money—and tax

Grab the Director’s Turnover & Tax Plan Calculator now

Only £59 – used by UK company directors just like you to plan ahead for turnover and tax.

For any other Accountancy questions please visit us here or call us on 01386 366741

Tax for Sole Traders Simplification: Is the Cash Basis Now Right for You?

Posted on June 13, 2025June 13, 2025 by Sarah

For the many sole traders and partnerships, managing finances and preparing for the year-end tax return can be a significant administrative burden. Traditionally, this has involved accrual accounting – a method that requires you to account for all invoices and bills when they are issued, not when they are paid.

However, in a major move to simplify tax for the sole trader or self-employed, HMRC has introduced significant changes that make a much simpler method – cash basis accounting – the new default.

Here at The Accountancy Office, we want to break down what this change means for you and your business. It’s a positive development that could make your bookkeeping easier and improve your cash flow, but it’s important to understand if it’s the right fit.

What is Cash Basis Accounting?

In simple terms, the cash basis is a method of accounting that records income and expenses only when money actually changes hands.

Income is recorded when it lands in your bank account.
Expenses are recorded when you actually pay for them.

This straightforward approach eliminates the need to track debtors (money you’re owed) and creditors (money you owe) for your tax return, offering a much clearer, real-time picture of the cash available to your business.

What Has Changed for the 2024/25 Tax Year?

Previously, the cash basis was an optional scheme with strict turnover limits. From April 2024, HMRC has supercharged the scheme, making it more accessible and beneficial than ever before. The key changes are:

It’s Now the Default: Cash basis is the new standard for sole traders and partnerships. If you want to use the traditional accrual method, you now have to actively choose to do so on your tax return.
Turnover Thresholds Scrapped: The previous entry limit of £150,000 and exit limit of £300,000 have been completely removed. This means unincorporated businesses of any size can now benefit from this simpler system.
Finance Cost Cap Removed: The previous cap that limited the deduction of interest and financing costs to just £500 has been abolished. You can now deduct the full interest costs, provided they are incurred wholly and exclusively for the business.
More Flexible Loss Relief: Restrictions on how you can use a business loss have been lifted. Under the new rules, losses calculated on the cash basis can be used in the same way as accrual losses, meaning they can be offset against your other income from the same or previous year.

The Benefits of Using the Cash Basis

For many businesses, these changes make the cash basis an attractive option:

Simplicity: Your record-keeping is significantly simplified, making it easier to manage your own books.
Improved Cash Flow: You only pay tax on money you have actually received. This can be a huge advantage if your clients are often slow to pay.
Clear Financial Picture: It provides an immediate and easy-to-understand snapshot of the cash your business has at any given moment.

Is the Cash Basis Right for Everyone?

While the cash basis is a fantastic simplification for many, it’s not a one-size-fits-all solution. For example:

Businesses that hold large amounts of stock may find the accrual basis gives a more accurate reflection of their profitability.
If you are seeking significant business finance, lenders often prefer to see accounts prepared on an accruals basis as it shows a complete picture of your financial health, including future liabilities and income.
The cash basis is not available for Limited Companies.

The new, expanded cash basis is a great opportunity for many sole traders, but it’s crucial to get it right.

To find out more and discuss what these changes mean for you, get in touch with our team today.

Tax Changes on Pick-Ups – April 2025

Posted on May 23, 2025 by Sarah

Starting from April 2025, significant tax changes will affect double cab pick-up trucks in the UK.

These vehicles, previously classified as commercial vehicles, will be reclassified as passenger cars for tax purposes. This reclassification impacts capital allowances and Benefit-in-Kind (BIK) taxation.

Key Dates:

•1 April 2025: For corporation tax purposes, double cab pick-ups will be treated as passenger vehicles.

•6 April 2025: For income tax purposes, double cab pick-ups will be treated as passenger vehicles.

Implications:

•Capital Allowances: Currently, businesses can claim full capital allowances on double cab pick-ups, treating them as plant and machinery. After 1 April 2025, these vehicles will be subject to car capital allowance rates, which vary based on CO₂ emissions.

•Benefit-in-Kind (BIK) Taxation: Presently, double cab pick-ups are subject to a flat BIK rate (£3,960 annually). Post 6 April 2025, BIK rates will align with those of passenger cars, calculated on a sliding scale based on CO₂ emissions. Given the typically higher emissions of these vehicles, this change could substantially increase tax liabilities for employees using them as company vehicles.

Transitional Provisions:

To ease the transition, HMRC has outlined that businesses purchasing, leasing, or ordering a double cab pick-up before the respective April 2025 deadlines can continue to apply the current tax treatment until:

•The vehicle is disposed of.

•The lease expires.

•5 April 2029.

Whichever occurs first.

Action:

If you’re considering acquiring a double cab pick-up, doing so before April 2025 will allow you to benefit from the existing tax advantages during the transitional period. It’s advisable to assess the long-term implications of these changes on their tax position and consider alternative vehicle options if necessary.

Please contact us if you’d like to discuss your Vehicle tax planning then please contact us on 01386 366741 or email here and one of our advisers will be in contact.

How to Stay in Control of Your VAT Bill

Posted on May 15, 2025 by Sarah

For many business owners, receiving a VAT bill feels like a nasty shock—suddenly, there’s a large amount to pay, and cash flow can take a hit. But VAT isn’t a surprise tax. It’s 20% of your sales, every quarter, and the key to avoiding stress is simple: don’t treat it as working capital.

Your VAT bill isn’t an unexpected cost – it’s money you’re collecting on behalf of HMRC. The sooner you separate it from your business funds, the easier it is to manage.

VAT Is Not Your Money – Don’t Spend It

When you invoice a client for £1,000 plus VAT, the total invoice is £1,200 – but only £1,000 belongs to your business. The extra £200 is VAT that you’re holding for HMRC.

Many businesses make the mistake of leaving VAT in their main bank account, using it to cover expenses, and then struggling to find the money when the quarterly VAT return is due. Instead, get into the habit of moving VAT straight into a separate account so it’s there when you need it.

How to Avoid VAT Bill Shock

1. Open a Separate Tax Savings Account

Set up a dedicated business savings account specifically for tax. This is where you’ll transfer your VAT, corporation tax, and any other tax liabilities, so it’s not sitting in your main bank account tempting you to spend it.

2. Transfer VAT Weekly or Monthly

Each time you receive a payment that includes VAT, transfer the VAT amount to your savings account. If you prefer, set up an automatic weekly or monthly transfer of 20% of your VATable sales into this account.

This way, when your VAT return is due, the money is already set aside – no stress, no panic.

3. Calculate Tax Obligations Regularly

Don’t wait until the end of the quarter to check how much VAT you owe. If you’re using accounting software like Xero, QuickBooks, or FreeAgent, you can check your VAT liability in real-time.

By reviewing your VAT position weekly or monthly, you’ll always know what’s coming and can adjust if needed.

4. Review Quarterly to Stay on Track

At the end of each VAT quarter, use reports from your accounting software to ensure you’ve set aside enough. If your business is growing and VAT payments are increasing, you may need to adjust your weekly or monthly transfers.

5. Plan for Other Taxes Too

VAT isn’t the only tax you need to set aside money for. Your business will also need to pay:

Corporation Tax (19-25% of profits)
PAYE & National Insurance (if you have employees)
Self-Assessment Tax (if you take dividends)

A good rule of thumb is to set aside around 30-40% of your profits for tax in a separate account. It’s better to have too much than too little.

Action Plan: Stay in Control of Your VAT & Tax

Set up a separate savings account for VAT & tax
Schedule weekly or monthly VAT transfers (20% of VATable sales)
Use Xero or other software to track VAT in real-time
Review quarterly to ensure you’re setting enough aside
Never use VAT for working capital—it’s HMRC’s money, not yours

Final Thoughts

VAT shouldn’t be a shock. By managing it properly, setting aside money regularly, and tracking your liability, you’ll always be prepared when the bill is due.

If you need help getting organised with VAT, cash flow planning, or accounting software setup, we’re here to help.

Call us on 01386 366741 or visit accountancyoffice.co.uk to book a consultation.

How much turnover does my business need to make to pay me what I want after tax?”

Posted on May 9, 2025 by Sarah

“How much turnover does my business actually need to make… to pay me what I want… after all taxes?”

If you run a UK limited company and pay yourself a combination of salary and dividends, you might be wondering:

This is a deceptively complicated question. Why? Because income tax, dividend tax, corporation tax and personal allowance tapering all interact in messy ways. The wrong combination of income can trigger extra tax without giving you more in your pocket.

But what if you had a simple calculator that worked it out for you?

That’s exactly what I’ve created: a Turnover Target Calculator for UK Ltd Company Directors.

What the Calculator Does

This tool shows you the turnover required to achieve a specific monthly net income, after all taxes have been deducted.

You can enter:

Your desired net monthly income
Your business’s annual running costs
Your average gross profit margin

The calculator then shows:

The gross dividend required to reach your net income target
Tax due on your salary and dividends
Corporation tax
Total pre-tax profit required
The turnover you need to make it all happen

Tax Efficiency Built In

It also flags when you hit the messy part of the tax system:

Personal allowance tapering (starts above £100,000 income)
The “tax trap” zone where earning more = disproportionately higher tax

To make this easier to compare, the calculator uses a benchmark row set at a net income of £99,999.96. This helps you see exactly how much extra tax you’d pay if you go over it.

Why This Matters

Most small business owners overestimate how much income they can draw and underestimate how much profit they need to generate to get it. Worse, they hit tax traps without realising.

This calculator makes it easy to:

Set realistic income goals
Avoid the tax cliffs
Understand the true cost of drawing more
Forecast more accurately

Ready to Use It to calculate your Business Turnover??

The Turnover Calculator is formatted for ease of use, fully protected so you can’t break it, and designed to save you time, stress, and costly mistakes.

For a limited time, the Turnover Calculator will be available free of charge whilst testing is completed. After that, it will be available to purchase online via secure link.

Would you like to start planning smarter with free access today? Get in touch to request your free copy.

Need help with your limited company finances? I’m an accountant who specialises in helping business owners take control of their numbers and their income. Drop me a message if you’d like personalised support.

My limited company,How much money does it need to earn to pay me £100,000?

Posted on April 22, 2025 by Sarah

In our previous blog, we wrote about Dave and Vicky, a married couple running a successful limited company, despite only forming their marketing consultancy company two years ago. However, they were in a bit of a mess with their finances.

In this blog, we outline one of the ways we helped this lovely couple get back on their feet and gain control of their finances.

The Buckhams were making good money, but every month, whatever came in, went straight out. Vicky admitted to having a love of fashion and an excessive online shopping habit. Dave, a keen sports player; loved various sports including football, golf and cricket and found himself regularly spending large sums of money on new kit.

Dave and Vicky had also taken four overseas family holidays in the past 12 months alone, believing the money in the business was theirs to spend – until the tax man told the Buckhams they owed thousands. They were utilising credit cards to pay the bills. They knew they needed to gain control of their personal spending and understand their business finances properly.

The Buckhams weren’t used to owning a limited company and having received no guidance from their previous accountant, they got into a bad habit of spending money freely. Having both been employed in the past, they were used to spending whatever money was in the bank as their taxes had already been paid.

When the tax bills landed, it was always a shock. They felt like they were working hard but never getting ahead financially.

They wanted to apply for a mortgage and to improve their family lifestyle, but they needed an additional £3,000 per month (after tax) from the company to do everything they wanted, an extra £36,000 per year.

Between them, the Buckhams were taking home £70,000 already so with the extra £36,000, this was going to give them the total household income of £106,000 needed (£53,000 each).

They asked us for help with crunching the numbers and how much business income would be needed to generate the additional cash.

Here’s what we came up with:

Dave and Vicky both receive an annual salary of £12,570. They needed dividends of at least £40,430 each, to give them a total income of £53,000 each per year.

To allow for the dividend tax that they would need to pay personally (with some of their dividends being taxed at the higher tax rate of 33.75%), they needed to receive dividends from the company of £47,000 each.

The personal dividend tax payable on £47,000 was £6,394 so the net cash in their pocket was only £40,606 each. A salary of £12,570 and a dividend of £40,606 gives each of them £53,176 per year (total household income of £106,352). A little over what they need but Vicky said she had her eye on a new pair of Christian Louboutins so any extra would be useful.

Let’s see how that looks for the company….

We need to consider company corporation tax, because the company will be taxed on the profits before the £47,000 dividends can be distributed to Dave and Vicky.

Dave and Vicky’s company needs net profit of £122,078 to cover a dividend of £47,000 each AND the corporation tax payable on company profits (with a marginal corporation tax rate of 23%).

We’ll add back their salaries (2 x £12,570 = £25,140) and £5,000 of business running costs onto the net profit to give us a gross profit of £152,218.

With their consultancy work, the average client value is £14,400 each year and their business operates at a 60% gross profit margin.

With a 60% gross profit margin, the Buckhams need to generate £253,700 of annual sales. Divided by the average client value of £14,400, this means they need 18 clients.

£253,700 of annual sales will allow Vicky and Dave to receive the personal income they need and for the business to cover the corporation tax liability. Knowing exactly how much their personal income is, has helped the Buckhams budget far more carefully. We also worked with them to ensure that the amount of sales was achievable AND how they were going to achieve it through a well-planned marketing strategy.

Their next tax bill is already planned for – no stress! Their mortgage application looks stronger and the Buckhams finally feel in control of their finances instead of constantly reacting to surprises. Vicky has also created a separate pot of money to save for her Christian Louboutins.

If you’re running a business but struggling to make your hard-earned cash actually work for you, we can help. Let’s get your finances working for your life goals – not against them.

Be more Buckham….

For advice on your Limited Company Call The Accountancy Office on 01386 366741 or book a call for a time to discuss that is convenient for you.

Financial Reporting Council – FRS 102 Changes from January 2026 – What It Means for Your UK Limited Company

Posted on March 28, 2025 by Sarah

The Financial Reporting Council (FRC) has announced changes to FRS 102 (the financial reporting rules for UK companies) that will take effect from 1 January 2026 (though you can choose to apply them earlier). These changes aim to make UK reporting more consistent with international standards. Here’s a simple breakdown of what’s changing and how it could affect your business:

New rules for recognising revenue
Revenue recognition will now follow a model similar to IFRS 15 (the international standard), but with some simplifications to make it easier to apply. This means you’ll need to recognise revenue more consistently based on when goods or services are provided, which could affect the timing of when you report income.
New rules for lease accounting
If your business rents property, equipment, or vehicles, you’ll need to show most leases directly on your balance sheet (in line with IFRS 16). This means leases will be recorded as assets and liabilities, which could affect your reported profits and financial position. There are some exemptions for smaller or short-term leases to reduce the admin burden.
Other changes
There are also updates to how you measure:
- Fair value – how you calculate the value of certain assets and liabilities.
- Uncertain tax positions – how you account for tax estimates when the outcome is uncertain.
- Business combinations – how you handle the accounting when you buy or merge with another business.
- Conceptual framework – updating the general principles that guide financial reporting to align with international standards.

Earlier change for supplier finance arrangements
If you use supplier finance (e.g., invoice financing or supply chain finance), the new rules for reporting these arrangements will apply from 1 January 2025.

What this means for you

Your financial statements might look different, with more assets and liabilities appearing on the balance sheet (especially for leases).
Revenue may be recognised at different times, which could affect reported profits.
You may need to update your accounting policies and systems to reflect these changes.

These changes aim to improve transparency and consistency in financial reporting – but they could also increase complexity. If you’re unsure how this affects your business, it’s worth discussing it with your accountant to plan ahead as to how these Financial Reporting Council changes could impact you and your business.