On 23 June 2026, HMRC published its Tax Update 2026 — a package of 40 measures covering simplification, modernisation, and compliance. It didn't make many headlines. But read closely, it tells you a great deal about where the tax system is heading and what it expects from the businesses operating within it.
The Big Picture
The update is built around three themes: making tax simpler to get right, making HMRC more digital, and closing the tax gap more effectively.
None of that is surprising. What's interesting is the scale and direction. HMRC isn't tweaking at the edges. It's rebuilding the system around the assumption that businesses run clean digital records, interact with HMRC continuously rather than annually, and have access to real-time information about their tax position.
For founders already running things that way, this is confirmation that the infrastructure they've built is the right one. For those who haven't, the gap between where they are and where the system expects them to be is widening every year.
The Small Business Review
One of the most significant announcements in the update was a commitment to a comprehensive review of how small businesses experience HMRC across their entire lifecycle — from start-up through to ongoing compliance.
The stated aim is to identify pain points and simplify guidance, improve digital services, and make it easier for businesses to get their tax right first time. It's an acknowledgement that the current experience is often poor — complex, fragmented, and time-consuming for businesses that don't have a finance team to absorb that friction.
What it signals is important: HMRC is investing in making compliance easier for businesses that engage properly with the system. The flip side is an increasingly robust compliance environment for those that don't.
The Digitalisation Push
Several measures in the update accelerate the move to a fully digital tax system:
- E-invoicing — the government confirmed Peppol as the core network for the UK's future e-invoicing system, with a mandate expected in 2029. Businesses that start building compatible systems now will have a material head start.
- Direct debit for PAYE and VAT — HMRC is consulting on requiring payment of PAYE and VAT by direct debit rather than manual transfer. More automation, less room for error or delay.
- Digital accounting data — HMRC is exploring how data businesses already hold in their accounting software could be used to support compliance, reducing the need for separate submissions. This is the longer-term vision: HMRC reading from your books, not waiting for your return.
The Compliance Intensification
The update also signals a harder line on non-compliance. The Strengthened Reward Scheme — HMRC's whistleblower scheme — offers individuals 15% to 30% of tax collected where their information leads to recovery of at least £1.5 million. New powers to publish details of those subject to Stop Notices on tax avoidance are being introduced. Late filing penalties are increasing.
The message is clear: the tolerance for errors, gaps, and late submissions is reducing as digital systems make them easier to identify.
What This Means for Founders
For most Runway clients, this package is less a warning and more a validation. Running on Xero, staying current with records, working with an accountant who reviews your position in-year — that's exactly the model the tax system is being designed around.
A few things worth keeping on your radar:
- E-invoicing. If you issue a significant volume of invoices, 2029 is closer than it sounds. Starting to understand Peppol-compatible software now puts you ahead of a compliance obligation that will eventually be mandatory.
- Real-time records. Every measure in this update assumes you have current, accurate records. If your books are perpetually six months behind, that gap creates risk — and it's getting harder to paper over.
- Tax advisor access. As HMRC's compliance tools become more sophisticated, the value of having an advisor who understands your position before HMRC does — not after — becomes more pronounced.
For the full detail on what was announced, see HMRC's Tax Update 2026 summary.
The tax system is being rebuilt around digital-first, real-time businesses. The founders best placed for it are those treating their finance function as infrastructure rather than an afterthought.
If you want to make sure your business is set up for where the tax system is heading, and review your position in-year, speak to a Runway co-founder.
