Business News England: HMRC Crackdown, Mandatory Payrolling, AI Adoption & UK Manufacturing Updates

Welcome to our latest summary of business news and updates for UK businesses, employers, and individuals.

This edition highlights key developments, regulatory changes, and financial updates that may impact your business operations and planning.

If you would like to discuss how these changes may affect your business or personal finances, please contact our team. Naseems Accountants provides clear, practical, free advice and ongoing support to help you make informed decisions and remain compliant.

Mandatory Payrolling of Benefits in Kind to Be Introduced in Phases

The Government has confirmed that the introduction of mandatory payrolling for Benefits in Kind (BiKs) will now be phased in over two years, following feedback and concerns raised by businesses and industry bodies.

The changes were originally expected to take effect from April 2027. However, the revised timetable will see the new rules introduced in two stages, giving employers additional time to prepare.

Under the new system, most taxable employee benefits will be reported and processed through payroll in real time, replacing the current requirement to submit annual P11D forms.

What Is Changing?

Employers who provide taxable benefits to employees will be required to report the value of those benefits through their payroll system. Income Tax and Class 1A National Insurance Contributions (NICs) will then be calculated and collected through payroll, rather than being reported separately at the end of the tax year.

The move is intended to simplify the reporting process and improve the accuracy and timeliness of tax collection.

Phase 1 – From 6 April 2027

The first phase of mandatory payrolling will apply to the following benefits:

• Company cars
• Company car fuel
• Vans
• Van fuel
• Employer-provided medical benefits

Employers offering these benefits must ensure their payroll systems can process them in real time from April 2027.

Phase 2 – From 6 April 2028

The second phase will extend mandatory payrolling to most other Benefits in Kind.

However, the following benefits will remain outside the mandatory regime and continue to be reported on a voluntary basis:

• Beneficial loans
• Living accommodation

Further details and practical guidance from HMRC are expected by July 2026.

What Should Employers Do Now?

Although these changes are not immediate, employers should start reviewing their current Benefits in Kind reporting processes and payroll systems to prepare for the transition. As a first step, consider scheduling an internal payroll system review or arranging a meeting with your payroll provider to discuss the upcoming requirements. Creating an action plan and setting clear timelines will help ensure your business is ready well in advance of the changes.

Businesses may also wish to consider:

• Reviewing the employee benefits they currently provide.
• Checking whether payroll software will support the new requirements. For example, popular payroll solutions such as Sage, Xero, and QuickBooks are widely used in the UK. Employers should check if their preferred platform offers updates or support for mandatory payrolling of benefits in kind.
• Identifying any training needs for payroll and HR teams.
• Planning ahead for changes to internal reporting procedures.

How Naseems Accountants Can Help

Mandatory payrolling is a significant change to Benefits in Kind reporting. Early preparation will help minimise disruption and ensure compliance when the new rules take effect.

Book a free consultation with Naseems Accountants for advice on these changes or assistance with preparing your payroll systems. Our team will guide you through the requirements and support a smooth transition.

HMRC Steps Up Action Against Tax Fraud on the High Street

HM Revenue & Customs (HMRC) has announced a major crackdown on tax evasion and illegal activity on UK high streets, planning 30,000 targeted interventions over the next year.

This initiative is part of a broader effort to address businesses suspected of facilitating criminal activity, especially in sectors such as vape shops, barbers, sweet shops, and convenience stores.

Announcing the campaign, Exchequer Secretary to the Treasury Dan Tomlinson stated: “Owners of dodgy shops that are evading tax: we are coming for you.”

A Nationwide Enforcement Campaign

The Government describes this as a sustained national effort to protect local communities and support legitimate businesses undercut by illegal operators.

Mr Tomlinson added:

“Too many high streets have been blighted by illegal activity that harms local communities and undercuts honest businesses, and we’re determined to fix this. This is a sustained, nationwide effort, and HMRC and its partners will use every power available to dismantle these criminal networks.”

As part of this strategy, HMRC has recruited a new team of 350 criminal investigators, as announced in the Autumn Budget 2025. They will investigate tax evasion and other financial crimes involving small businesses.

Joint Enforcement Activity Already Underway

To demonstrate the scale of the operation, a recent multi-agency enforcement exercise targeted six souvenir shops in central London.

The operation involved:

• HMRC
• Home Office Immigration Enforcement
• Westminster City Council Trading Standards
• The Metropolitan Police

The visits resulted in:

• HMRC is opening further tax compliance enquiries.
• Three arrests for immigration-related offences.
• Trading Standards seized goods valued at £5,433.

Which Businesses Are Being Targeted?

The campaign is focused on businesses and activities considered to present a higher risk of tax evasion or criminal activity, including:

• Cash-intensive businesses that may be linked to illegal activity.
• Businesses suspected of money laundering.
• Employers breaching National Minimum Wage regulations.
• Retailers selling illicit tobacco products or illegal vapes.
• Directors who repeatedly dissolve companies and reopen under new names, a practice commonly known as “phoenixing”.
• Providers and users of electronic sales suppression tools designed to manipulate till records, conceal sales and facilitate tax evasion.

What Does This Mean for Legitimate Businesses?

For compliant businesses, this crackdown aims to create a fairer trading environment by addressing operators who gain an unfair advantage through unlawful practices. To further reassure business owners, it is advisable to proactively demonstrate compliance with HMRC by maintaining accurate, up-to-date records, conducting regular internal audits, and keeping documentation of policies and procedures. Ensuring that all tax filings and employee records are properly organised can help reduce anxiety about potential enforcement actions and provide clear evidence of good practice if requested.

Business owners should ensure that:

• Accounting records are complete and accurate.
• Sales are correctly recorded and reported.
• Payroll procedures comply with employment and National Minimum Wage legislation.
• VAT and tax obligations are met on time.
• Internal controls are in place to prevent compliance issues.

How Naseems Accountants Can Help

With HMRC increasing compliance activity, businesses must maintain accurate records and robust accounting procedures.

If you are concerned about tax compliance or record-keeping, book a free accounting advice session with Naseems Accountants. Our experienced team will review your systems, identify potential risks, and help keep your business compliant.

Early action can help prevent costly penalties, enquiries and unnecessary disruption to your business.

HSE to Publish New Guidance on Workplace Robotics

The Health and Safety Executive (HSE), working alongside the Regulatory Innovation Office (RIO), has launched a new initiative to support the safe and responsible adoption of robotics in UK workplaces.

Announced during London Tech Week, the project has been developed in collaboration with industry partners and aims to provide businesses with greater clarity on regulatory requirements when introducing robotic technologies.

The initiative will see HSE working closely with industry bodies, including Automate UK and the Manufacturing Technology Centre (MTC), to develop guidance on the safe use of collaborative robots, commonly known as “cobots”.

Supporting the Safe Use of Cobots

Unlike traditional industrial robots that typically operate within restricted areas, cobots are designed to work alongside people and assist with tasks in a shared workspace.

The first phase of the project, due to launch this summer, will focus on providing clear guidance to businesses on safely integrating cobots into workplace operations while remaining compliant with health and safety regulations.

The aim is to give organisations greater confidence when investing in automation and robotic technologies.

Andrew Curran CBE, Director of Science and Chief Scientific Adviser at HSE, commented:

“We understand that despite there being no barrier to adoption in health and safety law, there is a fear of non-compliance, which is limiting adoption. Therefore, we are committed to working with the Regulatory Innovation Office and industry partners to deliver the first joint HSE and industry guidance on the use of cobots to address this barrier and improve business confidence.”

What This Means for Businesses

As automation technology continues to evolve, many businesses are exploring how robotics can improve productivity, efficiency and workplace safety.

The new guidance should help employers better understand:

• Their legal responsibilities when introducing robotics.
• How to carry out appropriate risk assessments.
• The safe integration of robots into existing working environments.
• Best practices for employee training and workplace safety.

Businesses considering investing in robotic technologies may benefit from monitoring further HSE announcements in the coming months.

High Energy Costs Drive Manufacturers to Consider Moving Production Overseas

New research from manufacturing body Make UK has revealed growing concerns about the competitiveness of UK manufacturing, with high energy costs prompting many businesses to consider relocating production abroad.

According to the findings, one in four UK manufacturers has either already moved production overseas or is actively considering doing so.

Rising Energy Costs Impact Competitiveness

Make UK reports that British manufacturers currently pay among the highest industrial electricity prices in developed economies.

The research suggests that the average UK manufacturer pays approximately 27p per kilowatt-hour for electricity, compared with around 16p in many comparable industrialised countries. In the United States, electricity costs can be as low as 6p per kilowatt-hour.

These rising costs are placing significant pressure on profit margins and making it increasingly difficult for UK manufacturers to compete internationally.

Growing Trend Towards Overseas Production

The survey found that:

• 25% of manufacturers have moved production abroad or are considering doing so.
• 10% are already outsourcing a greater proportion of production, particularly to Southeast Asia.
• A further 16% are actively considering outsourcing more manufacturing activity overseas.

Industry leaders have expressed concern that businesses are increasingly being forced to source products and services from overseas suppliers due to cost pressures within the UK market.

Additional Financial Pressures

Alongside energy costs, manufacturers continue to face wider economic challenges, including:

• Increased employment costs.
• Ongoing inflationary pressures.
• Global supply chain disruptions.
• Geopolitical uncertainty.
• International trade and tariff challenges.

According to Make UK, additional energy-related levies, including climate-related charges, are further increasing operating costs and reducing the competitiveness of British industry.

Government Support Measures

The Government has introduced support schemes designed to reduce energy costs for businesses.

These include:

• The British Industry Supercharger Scheme provides relief from several energy-related levies for around 450 energy-intensive businesses.
• The British Industrial Competitiveness Scheme (BICS) is expected to extend relief on certain levies to approximately 10,000 additional businesses from 2027.

However, Make UK is calling for the measures to be introduced sooner and extended across the wider manufacturing sector.

What This Means for Businesses

For manufacturers and other energy-intensive businesses, rising operating costs remain a significant challenge.

Business owners may wish to review their cost structures, energy usage and long-term financial planning to ensure they remain competitive in an increasingly challenging market. In the short term, consider taking immediate steps to reduce costs, such as renegotiating supplier contracts, conducting an energy audit to identify savings opportunities, switching to more cost-effective utility providers, and implementing energy-saving measures in the workplace. Small changes like optimising heating and lighting or scheduling machinery use during off-peak hours can also deliver quick savings while you explore longer-term strategies.

How Naseems Accountants Can Help

Managing rising costs and maintaining healthy cash flow is increasingly important for businesses in all sectors.

Naseems Accountants can help you review financial performance, identify opportunities to improve profitability, and strengthen cash flow management. We also assist with budgeting, forecasting, and strategic planning to help your business navigate economic challenges confidently.

If you need free advice on managing business costs or improving financial resilience, book your free consultation with our team. We are happy to help.

Only 20% of Small Businesses Use AI Regularly.

A recent report shows that Artificial Intelligence (AI) adoption among small businesses remains low, with only one in five using AI regularly in daily operations.

The report, UK SME Digital and AI Adoption: The State of Play in 2026, surveyed 1,320 micro and small businesses and found that just 21% use AI regularly, while only 6% have fully embedded AI into their everyday business processes.

The research was carried out by Enterprise Nation’s Tech Hub in partnership with Google, Sage, Dell Technologies and Square.

Digital Adoption Does Not Always Mean AI Adoption

Despite low AI usage, 57% of surveyed businesses described themselves as highly or moderately digital. This indicates that although many SMEs use digital tools, AI adoption still lags.

The findings also revealed significant differences between sectors and business sizes.

Which Sectors Are Using AI?

Businesses operating in the information and communications sector were the most likely to use AI, with 74% reporting some level of adoption.

In contrast, uptake was considerably lower in other sectors:

• Construction – 4%
• Agriculture – 1%

These figures suggest that industries relying on manual processes may be slower to adopt new technologies.

Larger Businesses Are Leading the Way

The report found a clear link between company size and AI adoption.

While only 34% of sole traders and one-person businesses reported using AI in any capacity, adoption rose significantly among larger SMEs. Around 68% of businesses employing between 50 and 249 staff said they were already using AI.

Among early AI adopters, 65% reported increased use over the past 12 months, showing that businesses embracing the technology continue to expand its role.

What Is Preventing AI Adoption?

Businesses that have not yet adopted AI cited several barriers:

• 53% said cost was a concern.
• 46% reported a lack of skills or knowledge.
• 38% had concerns about privacy and data security.
• 37% said they lacked the time needed to explore and implement AI solutions.

These challenges are common among smaller businesses with limited resources and internal expertise.

Regional Differences Across the UK

The report also identified significant regional variation in AI adoption.

Regular AI usage was highest in:

• London – 30%
• Scotland – 27%

In comparison, adoption was considerably lower in:

• North East England – 10%
• Northern Ireland – 6%

The findings also highlight a broader digital divide. In the North East, 22% of SMEs were classified as digitally excluded, with many operating mostly offline.

What Does This Mean for Small Businesses?

AI is becoming a valuable tool for improving productivity, automating routine tasks, enhancing customer service, and supporting decision-making. While adoption remains low among smaller businesses, those that implement AI may gain a competitive advantage.

However, successful adoption does not necessarily require a major investment. Many businesses begin with simple applications such as:

• Drafting emails and marketing content.
• Creating social media posts.
• Summarising documents and meeting notes.
• Automating administrative tasks.
• Analysing business data and reports.

Starting small and identifying practical use cases can deliver meaningful benefits without high costs or disruption. For example, accessible AI tools such as ChatGPT for drafting text, Grammarly for writing assistance, and Canva for designing graphics are easy entry points that many small businesses find helpful. Exploring these beginner-friendly options can help businesses overcome hesitation and experience the advantages of AI first-hand.

Source: The UK SME Digital and AI Adoption: The State of Play in 2026 report is available here: https://a.storyblok.com/f/102007/x/ec83d6c6a3/digital-and-ai-adoption-among-uk-smes.pdf

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