StarLight Accountancy

📢 FRC Updates to FRS 102 & FRS 105 – Effective from 1 January 2027

The Financial Reporting Council (FRC) has issued amendments to FRS 102 and FRS 105, following the introduction of IFRS 18 (which replaces IAS 1).

🔎 What’s changing?
The updates mainly affect companies that adapt Companies Act balance sheet or P&L formats in their FRS 102 accounts.

Key points:

Presentation requirements have been revised and reorganised

Definitions of current/non-current assets and liabilities have been updated

Changes are proportionate — the FRC has not adopted the full IFRS 18 category model

Effective for periods beginning on or after 1 January 2027

There are also minor improvements to consolidation and inventory sections under FRS 102 and FRS 105.

💡 For most small and medium-sized UK companies, the impact will be limited — but those using adapted formats should review their reporting approach ahead of 2027.

⚖️ Upcoming Inheritance Tax Changes for Family Businesses – What You Need to Know Before April 2026

For many family businesses, shares in a trading company form a vital part of long-term family wealth. Historically, these shares have provided a tax-efficient way to pass on assets to the next generation, thanks to Business Property Relief (BPR). Simply holding onto shares until death has often meant they could be inherited completely free of inheritance tax (IHT).

However, this long-standing relief is about to change.

From 6 April 2026, new inheritance tax rules will cap Business Property Relief, meaning some families could face significant new tax bills when passing on business shares. There is still time to plan ahead—but that window is closing fast.

🧾 What’s Changing from April 2026

Under current rules, shares in unquoted trading companies can qualify for 100% BPR after two years of ownership. This means:

No IHT is payable on the value of those shares on death.

The relief is unlimited in value.

The same relief applies to certain lifetime gifts.

From April 2026, however, BPR will be capped:

The first £2.5 million of qualifying business assets per person will continue to receive 100% relief.

Amounts above £2.5 million will only receive 50% relief, leading to an effective 20% tax rate on the excess.

The £2.5 million allowance can be transferred to a surviving spouse or civil partner, effectively allowing a couple to benefit from up to £5 million in total relief.

This marks a major shift in estate planning for business owners with shareholdings above £2.5 million.

💡 Example: The New Tax Impact

Consider a trading company valued at £4 million.

Before April 2026: All £4m qualifies for full relief — no IHT due.

After April 2026: £2.5m receives 100% relief, but the remaining £1.5m faces a 20% effective tax charge — resulting in a £300,000 IHT bill.

That’s a six-figure tax liability on an asset that previously passed tax-free.

🛠️ Planning Opportunities Before the Deadline

The good news? There are still planning options available to help manage or mitigate the new IHT exposure — but only if you act before April 2026.

1. Inter-Spouse Transfers

Transferring shares between spouses can ensure both make use of their £2.5m allowance, effectively doubling the IHT-free amount to £5m for a couple. These transfers are generally tax-neutral and can save hundreds of thousands in future IHT.

2. Lifetime Gifting

Gifting shares during your lifetime can remove them from your estate after seven years, and under current rules, BPR may eliminate any immediate tax charge. This can lock in today’s more generous reliefs before the new limits apply.

3. Share Reorganisations

Restructuring ownership—for example, creating “growth shares” for younger family members—allows you to retain control of existing value while passing future growth outside your taxable estate.

4. Use of Trusts

Trusts can still offer tax efficiency, protection, and flexibility when structured correctly. They can help manage how and when beneficiaries receive value, especially for larger estates above the £2.5m threshold.

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AI in Accounting: Not the Future — the New Normal

Artificial Intelligence (AI) is no longer a futuristic concept in accounting. It’s already here — seamlessly integrated into the tools that firms use every day. From automating data entry to improving accuracy and turnaround times, AI is quietly transforming what clients expect from their accountants and bookkeepers.

For UK accounting firms, this isn’t about chasing the latest tech trend. It’s about using AI and automation where they truly make a difference: reducing admin, tightening controls, and improving consistency across clients and teams.

AI Doesn’t Replace Expertise — It Protects It

AI’s purpose in accounting isn’t to replace human expertise; it’s to enhance it. By automating repetitive and time-consuming tasks, professionals can focus on higher-value work — the kind that requires experience, judgement, and strategic thinking.

When used well, AI frees accountants from operational friction, helping them deliver better advice and more proactive insights to clients.

Where AI Adds Real Value Today

The most effective AI applications in accounting are already improving daily workflows in practical, measurable ways:

✅ More accurate data extraction from invoices and receipts
✅ Consistent categorisation right from the start
✅ Cleaner data entering accounting systems
✅ Fewer hours chasing missing paperwork
✅ Less rework caused by inconsistent client inputs

These aren’t just “nice to have” benefits. They’re the foundations of a well-run practice. Strong foundations lead to faster month-end close, clearer reporting, and more meaningful client conversations.

Discipline and Accountability Still Matter

Automation has made bookkeeping faster, but it hasn’t eliminated the need for professional oversight. The firms doing this right aren’t removing human judgement — they’re reinforcing it.

This means:

Using technology for high-volume, repetitive tasks

Standardising processes for consistency

Setting clear review and approval checkpoints

Keeping qualified professionals accountable for accuracy and exceptions

AI works best when it supports control and compliance, not just speed.

Choosing AI That Works in the Real World

When choosing AI tools, it’s important to focus on performance, not promises. Many software demos show perfect results with clean, pre-formatted data — but real client data is rarely that neat.

Think:

Poor-quality scans

Inconsistent formats

Missing fields or mixed VAT treatment

Multi-page invoices and unusual edge cases

The true measure of an AI tool is how it performs with real-world complexity.

The most successful firms treat AI as a long-term capability, not a one-off project. They test new tools with actual client data, measure accuracy over time, and build adoption gradually to keep teams confident and quality high.

Final Thoughts

AI in accounting isn’t about replacing people — it’s about empowering professionals. When used thoughtfully, it creates more time, more accuracy, and more value for clients.

At StarLight Accountancy, we’re committed to embracing smart technologies that make life easier for our clients and our team — ensuring accounting remains accurate, efficient, and forward-thinking.

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🌟 Big Changes Coming: Be Ready for Making Tax Digital (MTD)! 🌟

From April 2026, new Making Tax Digital (MTD) rules will mean sole traders and landlords must use approved digital systems to submit quarterly income and expense updates to HMRC.

According to Monzo’s latest research, while 70% of sole traders are aware of the upcoming changes, 28% say they’re not confident they’ll be ready in time. The good news? 61% of business owners believe simpler, more integrated tools would make tax filing much easier — and help reduce the stress of managing taxes.

At StarLight Accountancy, we know that tax admin can be overwhelming — half of sole traders find it stressful, and many spend more than 25 hours a year on it! That’s time that could be spent growing your business or enjoying life.

💡 Our advice:

Don’t wait until the last minute — get your digital systems in place early.

Use HMRC-approved software or apps.

Seek professional guidance to ensure you’re fully compliant.

If you’re unsure how the new MTD rules affect you, or which software is right for your business, our friendly team at StarLight Accountancy is here to help you prepare with confidence.

📞 Contact us today for expert MTD support and personalised advice!

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📢 Big News: HMRC Confirms Major Changes to MTD for Income Tax

Starting 6 April 2026, Making Tax Digital (MTD ITSA) becomes mandatory for self-employed individuals and landlords earning over £50,000 — with lower income bands following in 2027 and 2028.

✅ Simpler quarterly updates
✅ No EOPS required
✅ New penalty system with a “soft landing”
✅ Exemptions for digital exclusion and non-residents

Now’s the time to get MTD-ready.
Need help preparing? StarLight Accountancy Ltd can make digital tax simple.

📞 Contact us today!

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🚀 Making Tax Digital: What’s Changing and What It Means for You

The UK government is continuing its journey to modernise the tax system through Making Tax Digital (MTD) — helping businesses go digital, reduce errors, and simplify tax reporting.

Here’s what you need to know 👇

1️⃣ MTD’s Role in Modernising the Tax System

Since April 2022, all VAT-registered businesses have been required to keep digital records and file VAT returns using MTD-compatible software.
✅ 80% of users say it’s easy to use
✅ 67% say it helps reduce errors
✅ Many report faster submissions and greater confidence in getting their tax right

MTD isn’t just about compliance — it’s driving wider digital transformation and productivity across UK businesses.

2️⃣ Expansion to More Businesses

The government has confirmed that MTD for Income Tax Self Assessment (ITSA) will be rolled out gradually to include more small businesses:

📅 April 2026: Sole traders & landlords with income over £50,000
📅 April 2027: Income over £30,000
📅 April 2028: Income over £20,000

This expansion means around 900,000 additional taxpayers will benefit from digital record keeping and streamlined reporting — with plenty of time to prepare.

3️⃣ Improvements and Simplifications

HMRC is also making MTD more user-friendly by:
🔹 Exempting certain groups (e.g. Power of Attorney holders, non-UK entertainers, ministers of religion)
🔹 Simplifying year-end reporting so all submissions go through MTD software
🔹 Allowing 31 March year-ends to align smoothly with MTD start dates
🔹 Introducing powers to cancel penalties in fair circumstances

💡 Why It Matters

These updates aim to make the UK tax system:
✅ More transparent
✅ Easier to manage
✅ Better aligned with modern business practices

If you’re a sole trader or landlord, it’s time to start preparing for the move to digital record keeping.
Our team can help you choose the right software and ensure you’re MTD-ready before your start date.

📞 Get in touch with us today to discuss your MTD transition plan.

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📢 Major Changes Ahead: The Employment Rights Act 2025

The Employment Rights Act 2025 has officially become law (as of 18 December 2025) — marking one of the most significant overhauls to employment law in Great Britain in decades.

The Government’s “Roadmap for Delivering Change”, released on 1 July 2025, outlines when each reform will take effect — and these updates are set to reshape the relationship between employers and employees from 2026 onward.

Here’s a quick snapshot of key reforms to be aware of:

✅ From April 2026:

Statutory Sick Pay (SSP) payable from day one of sickness to all workers

Parental and paternity leave become day-one rights

Creation of a new Fair Work Agency to enforce workers’ rights and tribunal claims

Protective award for failure to consult on redundancies increases from 90 to 180 days’ pay

✅ From October 2026:

“Fire and rehire” tactics to be treated as automatic unfair dismissal (with limited exceptions)

Tribunal claim time limits extended from 3 to 6 months

Employers must take all reasonable steps to prevent sexual harassment

Third-party harassment liability reinstated for employers

✅ From 2027:

Unfair dismissal protection available after 6 months’ service (down from 2 years)

Compensation caps for unfair dismissal removed

Bereavement leave introduced as a day-one right

Flexible working to become the default option unless refusal is justified

Zero-hours workers entitled to fair notice, compensation for cancelled shifts, and the right to request guaranteed hours

Large employers (250+ employees) to create menopause and gender pay gap action plans

💡 These changes will require significant updates to employment contracts, policies, and HR procedures across all industries.

📍 Now is the time for employers to start preparing for compliance and policy alignment ahead of the rollout dates.

For advice or assistance reviewing your employment policies or contracts, contact StarLight Accountancy — we’re here to help you stay compliant and ready for change.

Free download: Employment Rights Act changes at a glance Keep up to speed with the key changes to employee day one rights with our handy Employment Rights Act download

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⚠️ Important Update from Companies House

From 1 February 2026, Companies House will increase several filing fees, including the company incorporation fee, which will rise from £50 to £100.

To avoid the additional £50 charge, make sure to submit your incorporation before 1 February 2026, and ensure:
✅ Online incorporation forms are completed
✅ ID verification is done for all Account Holders, Directors, and Shareholders
✅ All Directors and PSCs have provided their 11-character Companies House Personal Code
✅ Any previously rejected applications are corrected and resubmitted

These changes come as part of the Economic Crime and Corporate Transparency (ECCT) Act, designed to:
🔹 Improve identity verification
🔹 Reduce fraud and misuse of the register
🔹 Strengthen transparency and trust in UK businesses

💡 Don’t delay — complete your incorporation now to lock in the current £50 fee!

Changes to Companies House fees From 1 February 2026, some of our fees will be changing.

Innovative financial insights await you on our website. Elevate your business success by exploring tailored strategies designed to drive growth and efficiency.

Did you know that over 5.5 million people in the UK overpay tax to HMRC every year, losing money that’s rightfully theirs?

HMRC doesn’t automatically correct these errors — but we can review your tax and help you reclaim what you’ve overpaid.

More than 5.5mn people in UK overpay tax to HMRC Payslip errors and complex rules blamed for £3.5bn in overpayments