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The circular economy could be poised for rapid expansion with multiple trends set to boost the sector.

Manufacturers and distributors have been gradually increasing their use of these practices over the last few years. But experts agree there is huge potential to develop them further, supported by changes in the legal and business landscape.

This article looks at the main trends likely to impact the circular economy in manufacturing and distribution in 2026, and delves into how firms can take advantage of the opportunities.

Here’s what we discuss:

Economic benefits of the circular economy

Rather than the linear approach of making, using and discarding products, the circular model designs out waste and pollution by reusing, repairing, refurbishing, and recycling materials.

Business is increasingly recognising the benefits of circular practices.

Between 2023 and 2024, investment deal values in this sector grew 60%, according to BDO’s report Circular Economy Trends Report 2025.

The variety and maturity of business models attracting attention is also increasing, the report says.

With interest rates falling, investment in the circular economy could be set to accelerate further in 2026.

Research by research by UK charity WRAP and OC&C Strategy Consultants found that, since 2020, circular industries have grown 3.1% faster than linear industries, and circular-native businesses have grown up to twice as fast. The advantages include:

• Cutting costs, for example, on raw materials, energy use and disposal.
• Increasing competitive differentiation, and consumer and brand loyalty, by appealing to environmentally conscious customers, and increasing transparency and customer lifetime value.
• Adding revenue streams with new types of products or services.

David Stewart, engineering director, research & innovation at the High Speed Sustainable Manufacturing Institute (HSSMI), says the economic opportunity of recovering an expensive asset is now the overwhelming driver of circular models:

“Where there is a good business case to repurpose, remanufacture, recondition or recycle, businesses have flourished and adoption will remain strong,” he says. “In the battery industry for example, there have been many new ventures over the past three years to remanufacture battery packs or recycle them back to basic materials to incorporate into new cells.”

Material scarcity: A fundamental circular economy driver

In many countries, the growing financial incentive is also driven by the fact that China controls much of the global supply and or processing power for many critical raw materials.

This includes:

• Neodymium supply for electric motors.
• Gallium supply for semi-conductors.
• Nickel, manganese and cobalt refining and processing for batteries.

“Western continents like North America and Europe are largely at the mercy of Beijing’s controls on export of these materials,” adds Stewart. “Without enough domestic access, we rely on circular systems to collect, recover and consume these materials.”

To counter this, he predicts new recycling facilities for processing important materials, such as rare-earth elements, will launch across Europe.

Advanced sorting and dismantling technologies will also evolve to address the issue.

ERP and digital passports push adoption of the circular economy

In the UK, extended producer responsibility (EPR) legislation is set to drive more circular practice.

Previously, taxpayers footed the bill for the disposal and recycling of packaging.

But from FY26, producers pay a flat fee to help pay for these processes. From FY27, these payments will be based on recyclability, providing a huge incentive to make their packaging more circular.

In the UK, the government has established a Circular Economy Taskforce with a view to setting strategy in the near future. It is catching up with the EU, which already has multiple regulations promoting reuse and recycling.

One of the most important initiatives in 2026 will be phasing in digital product passports (DPP), starting with high environmental impact items such as batteries, textiles, electronics, and furniture.

For example, passports for many batteries will be required from February 2027.

A DPP is a scannable, dynamic profile that follows a product throughout its lifecycle, from raw material to resale. It reveals critical data such as material origins, manufacturing processes, energy use and emissions, durability, and repair or disposal options.

This will help firms track lifetime performance and improve reuse or recycling.

The EC is expected to produce a registry of passport requirements for specific product groups by mid-2026, with full deployment expected by 2030.

Innovation keeps pushing circular models

The transition to cloud-based systems will continue to drive circular economy adoption by supporting innovations such as remote condition monitoring, DPPs, and IIoT connections.

Increased storage access and processing power will drive new online platforms enabling product sharing, resale and refurbishment.

IIoT connectivity will continue to grow, allowing for timely maintenance and repairs. Building on this, predictive maintenance uses IIoT sensors combined with AI to track equipment and product conditions.

This enables intervention just before a failure occurs, extending product lifespan.

Digital twins take this even further by creating dynamic virtual models of physical items, updated with live data. For instance, a digital twin of a remote industrial pump can track use patterns, service history, and component wear after purchase to optimise the timing of repair, lengthening the product’s life.

The information can also inform product design, making products easier to disassemble, repair, and recycle—such as by minimising adhesives or incorporating modular components that are adaptable for reuse.

These are just a few of the many ways AI is expected to contribute to the circular value chain, with others ranging from hypersensitive sorting of materials in recycling to automated disassembly, predictive waste flow, and generative circular design.

Yet another innovation to watch is chemical processing techniques—such as pyrolysis, and photocatalytic and enzymatic recycling—which can convert plastic waste into valuable chemicals or fuels.

The obstacles remaining for circular economy adoption

Despite all these advancements, manufacturers will face many challenges in progressing circular practices in 2026.

Products are still not designed for circularity. For example, many batteries and devices are filled with glue, making them quick and easy to assemble but a nightmare to disassemble.

And manufacturers still face trade-offs with other business imperatives such as short-term revenue gain, speed to market, or lack of access to skills.

“Companies with new technologies and or tight budgets often focus on getting the product to market quickly, in volume and performing robustly,” says Stewart. “They don’t deny circular economics are important, they’re just too busy, and it becomes an afterthought. But it’s too late when you’ve already locked in the design. Manufacturers need to work more closely with designers to integrate disassembly options early in the process.”

Case study: Why refurbished phones are booming thanks to the circular economy

In Europe, Vodafone predicts refurbished mobile phones will grow from 309m in 2023, to 431m phones by 2027.

It’s part of a rapidly advancing global circular devices market that is set to exceed £150 billion by 2027, according to mobile operator organisation GSMA.

Steven Athwal, founder and CEO of The Big Phone Store, which has a strong focus on refurbished phones, says distributors and manufacturers are increasingly committing to refitting and reusing their products.

“Consumer demand for greener choices continues to grow, regulation is tightening, and customers are more inclined to enter the circular economy,” he says. “Scarcity of raw materials also makes refurbishment more financially appealing.”

Steven expects that tighter global rules on how e-waste is handled, reported and recycled—such as the UK Extended Producer Responsibility (EPR) scheme—will make manufacturers more accountable for product life cycles.

Governments could also increase rewards, such as tax incentives for refurbished goods. Or they could follow France’s lead in mandating the use of such goods—20% of IT devices bought by French organisations must be refurbished by law, with a target of 40% by 2040.

Steven also foresees more companies leasing so they can focus on reuse and reissue. And he predicts large companies will embed refurbishment into their business models, to gain control over their product life cycle.

However, as with other industries, phone manufacturers and distributors still face many challenges in product creation.

“Phones are designed to look great, but not to be opened, making them expensive and slow to fix,” he says. “We can overcome this with design standards that favour repairs and more research into modular parts. The other challenge is that customers are worried about warranties, software updates, safety, and the lifespan of refurbished devices. We have to promote quality control, extended warranties and transparent grading to gain their trust.”

Steven says a cultural shift is also needed for both companies and the public to move away from their obsession with new things.

A 5-step action plan for increasing circular practices

Here are some next steps for moving into the circular economy, or increasing your presence there:

• Increasing the amount you recycle is a good start. But consider a more holistic strategy that embeds circular principles—such as durability, modular designs and swappable parts—at the core of your product design and service.
• Promote a culture of long-term value. Think of every device as a long-term asset, not just a unit shipped. For example, consider generating value through leasing, repairs, and refurbishments.
• Investigate the latest developments in IoT, predictive maintenance, and digital twin technology to support a more circular model.
• Look at how AI is transforming production and distribution in areas such as real-time inventory monitoring and demand forecasting to reduce waste, or enhanced reverse logistics for more efficient returns and repairs.
• Get deeper insights and visibility on your entire manufacturing operations to make better decisions about waste. Consider integrating your ERP, third-party logistics (3PL) and warehouse management for greater efficiency.

Final thoughts

The shift towards a circular economy continues, and is no less vital to business effectiveness and efficiency than it ever was. It is the ultimate secret trick that the C-suite needs to know about.

For CFOs, this means rethinking how value is created and captured through financial performance, long-term resilience, compliance, and brand integrity.

Sage X3 is a new era of ERP that provides the backbone for that kind of visibility and control.

It allows finance leaders to integrate sustainability metrics into the same system that manages costs, inventory, and profitability.

By connecting data across the value chain, CFOs can model the financial impact of circular initiatives, identify efficiencies, and make decisions grounded in both sustainability and solid business logic.

As a leader, your single most important job isn’t having all the answers. It’s making sure your team knows what’s expected of them. When you fail to set clear expectations, you’re not just creating confusion; you’re actively setting your people up to fail. And that’s a fast track to chaos, missed deadlines and a revolving door of talent.

Unspoken expectations are just premeditated disappointments. You have a picture in your head of what “good” looks like, but if you don’t share it, how can anyone else possibly see it? They’re left guessing, second-guessing and trying to read your mind. It’s exhausting for them and frustrating for you.

This is your playbook for getting it right. We’re going to show you how to swap vague instructions for crystal-clear outcomes, turn confusion into alignment and build a high-performing team that knows exactly how to win.

Why setting clear expectations isn’t just a task, it’s your job

Setting expectations is the absolute foundation of effective leadership. It’s not a box-ticking exercise you do once and forget about. It’s the daily work of building trust, eliminating guesswork and creating the psychological safety your team needs to do their best work.

Many leaders shy away from being direct because they confuse clarity with micromanagement. They’re not the same thing. 

Micromanagement is telling people how to do their job. Setting clear expectations is about defining ‘what success looks like’ and then empowering them to figure out ‘the how’. It’s the difference between being a centralised decision-maker and being a guide. By providing a clear destination, you give your team the freedom and autonomy to navigate the journey. That’s not control; it’s empowerment.

This fundamental leadership skill is the bedrock of high-performing teams, but its absence can create hidden costs that quietly drain your business. So, here are 11 tips on setting employee expectations the right way.

1. The hidden costs of unclear expectations

Vague expectations are a quiet drain on your business. They create friction, waste and frustration that slowly grinds your team to a halt. When people don’t know what’s expected of them, the damage is real and quantifiable.

You see it in the wasted hours spent on rework because the first attempt missed the mark. You feel it in the plummeting morale when people feel like they can never win, no matter how hard they try. You notice it when your most engaged employees start to pull back, stop offering ideas and do just enough to get by. And you definitely feel it when your most talented people walk out the door, tired of the constant guessing games.

This isn’t just a “people problem”, it’s a performance problem. It’s a recipe for chaos that directly impacts your bottom line. Getting clear on expectations isn’t just a nice-to-have; it’s a business necessity.

The first step to fixing this is to get brutally clear on what you actually want your team to achieve.

2. How to define what ‘done’ looks like

“Can you sort this out for me?” is not an expectation. It’s a hospital pass. Stop assuming people know what you mean by “done”. You need to move from delegating tasks to defining outcomes. It’s a subtle but powerful shift.

The best way to do this is by using the SMART framework. It’s a classic for a reason—it works. It forces you to get specific and create a shared, unambiguous picture of the end goal.

• Specific: What exactly needs to be accomplished? Instead of “Improve our social media,” try “Increase our LinkedIn followers.”
• Measurable: How will you know when it’s done? “Increase our LinkedIn followers by 15%.”
• Achievable: Is this realistic given the resources and timeframe?
• Relevant: How does this connect to the bigger picture? Does it support the team’s and the company’s goals?
• Time-bound: When does this need to be completed? “Increase our LinkedIn followers by 15% by the end of Q3.”

Using this model eliminates ambiguity and ensures everyone is aiming for the same target. Once you know what ‘done’ looks like, you need to clarify who is responsible for getting it there.

3. End the confusion: Clarify roles with the RACI model

“I thought you were doing that!” is a phrase that should strike fear into any leader’s heart. It signals a complete breakdown in role clarity. The RACI model is a powerful, no-nonsense tool for making sure this never happens again.

It forces you to map out who does what, preventing tasks from being dropped and stopping people from stepping on each other’s toes. Here’s how it works:

• Responsible: The person (or people) who actually does the work. They are the ‘doers’.
• Accountable: The one person who is ultimately answerable for the work getting done correctly. This is the owner and there can only be one.
• Consulted: The experts who need to provide input or feedback before the work is done. This is a two-way conversation.
• Informed: The stakeholders who need to be kept up-to-date on progress but don’t need to be directly involved. This is a one-way communication.

Mapping this out for every major project or initiative is a game-changer. It provides a single source of truth for who is involved and in what capacity, bringing order to potential chaos.

Knowing what needs to be done and who needs to do it is crucial, but it’s not enough to inspire great work.

4. The power of ‘why’: Communicating purpose, not just tasks

People don’t pour their hearts into a to-do list. They pour their hearts into a mission. If you want your team to be truly motivated, you need to connect their work to a bigger purpose. Explain the ‘why’ behind the ‘what’.

Instead of just saying, “We need to hit our sales target,” explain why it matters. “Hitting our sales target this quarter means we can invest in the new product feature our customers have been asking for, which will help us serve them better.”

This simple shift in communication transforms a mundane task into a meaningful contribution. It helps your team see how their individual effort fits into the company’s goals and the value you provide to your customers. A sense of purpose is the ultimate performance-enhancing drug. It’s a core component of building a great company culture and demonstrating empathetic, effective leadership.

With the ‘why’ established, the timing of your conversation becomes critical.

5. Set expectations early to prevent chaos later

The best time to set expectations is right at the very start. The worst time is when a project is already off the rails. Being proactive here will save you a world of pain.

For any new project, role or initiative, your first step should be a dedicated kick-off meeting to establish alignment. Get everyone in a room (virtual or physical) and agree on the goals, roles (using RACI), timeline and what ‘done’ looks like.

This proactive approach prevents the massive waste of time, energy and morale that comes from having to course correct midway through a project. An hour spent on alignment at the beginning can save you weeks of rework and frustration later.

As you set these expectations, it’s also vital to consider the people who will be delivering on them.

6. How to align expectations with your team’s strengths

Great leaders don’t try to force a square peg into a round hole. They understand the unique talents of each person on their team and set expectations that play to those strengths.

Take the time to understand what each team member excels at and what they enjoy doing. Is one person a brilliant problem-solver but a less effective communicator? Assign them the complex technical task, not the client presentation. Is another a natural relationship-builder? Give them the responsibility of managing stakeholder communications.

When you assign tasks that leverage individual strengths, you get two massive benefits: better results and higher engagement. People are more motivated and effective when they are doing work they are good at and find rewarding.

Setting expectations is just the beginning; the real work happens in the follow-up.

7. The importance of check-ins and non-stop feedback

Setting expectations is not a “set it and forget it” activity. It’s a continuous conversation. You don’t just point the ship in a direction and hope for the best; you need to keep steering.

Regular, informal check-ins are your steering mechanism. They are crucial for reinforcing expectations, providing real-time coaching and clearing roadblocks before they become major crises. A quick, “How are you getting on with that report? Is anything unclear?” can prevent a small misunderstanding from derailing a whole week’s work.

This creates a continuous feedback loop that keeps everyone aligned and moving in the right direction. It’s not about checking up on people; it’s about checking in with them to offer support.

This culture of open dialogue should also flow in the other direction.

8. How to build a culture where people can challenge expectations

Your team on the ground often has a better view of the reality of a project than you do from a distance. Creating a culture of psychological safety, where employees feel comfortable questioning or pushing back on unrealistic expectations, is a sign of a healthy, confident team.

If a team member can say, “I understand the goal, but given our current workload, that deadline isn’t realistic,” it’s not insubordination—it’s valuable data. It gives you a chance to re-evaluate and create a better, more achievable plan. This collaborative approach prevents burnout and leads to far more successful outcomes than a top-down command-and-control style.

To support these conversations, verbal agreements aren’t enough.

9. If it’s not in writing, it doesn’t exist: Document your expectations

Human memory is notoriously unreliable. A verbal agreement made in a busy hallway is not a solid foundation for a critical project. If it’s important, write it down.

Documenting key expectations in a shared, accessible place is non-negotiable. Whether it’s in a project management tool like Asana or Trello, a follow-up email after a meeting or a formal project brief, you need a single source of truth.

This simple act eliminates the “I thought you meant…” arguments. When there’s a disagreement, you can both refer back to the written record. It holds everyone accountable, including you. Smart employee management software can provide a central place for this.

With everything documented, you can then focus on tracking your progress.

10. How to measure success and celebrate wins

What gets measured gets managed. You can’t know if you’re winning if you don’t keep score. It’s essential to track progress against the specific, measurable outcomes you defined with the SMART framework.

But tracking isn’t just about spotting problems. It’s also about celebrating progress. When your team hits a key milestone, acknowledge it. When they achieve the final goal, celebrate it. Recognition is the fuel that keeps a high-performing team going. A simple “great work on this” in a team meeting or a company-wide shout-out can have a huge impact on morale and motivation.

Even after the project is complete, there’s one final step to ensure you keep getting better.

11. Lessons learned: The power of the post-project debrief

The project is done, the champagne has been popped, but the learning has just begun. One of the most valuable things you can do is conduct a “lessons learned” session or a project retrospective.

This is a blame-free review to identify what went well, what didn’t and how the process of setting and managing expectations can be improved next time. Ask questions like:

• Were the initial goals clear?
• Did everyone understand their roles?
• Did we communicate effectively?
• What roadblocks did we hit and how could we have anticipated them?

This transforms every project, successful or not, into a learning opportunity, making your team smarter, stronger and more aligned for the next challenge.

Setting clear expectations is the art and science of great leadership. By implementing these strategies, you can build a culture of clarity, trust and high performance.

Ready to raise the bar on every project?

Empower your team with the tools and insights they need to succeed. Employment Hero’s employee management solutions help you set clear goals, track performance in real time and provide meaningful feedback that drives growth. 

From onboarding new hires to managing ongoing development, our platform makes it easy to keep everyone aligned, accountable, and motivated. By turning clarity into action, you can build a more engaged, productive workforce and ensure every project delivers its full potential. x

Discover how Employment Hero can transform the way your team works and help you achieve better results, every time.

Building a global team is one of the most powerful ways to scale your business. But the old way is broken. The costs and complexity of setting up local legal entities in every new country are a major barrier to growth. There’s a smarter way. An Employer of Record (EOR) lets you hire top talent anywhere in the world, without the administrative nightmare.

This streamlined approach gives you the flexibility and efficiency to build your dream team, no matter where they live. Forget the old rules. It’s time to access a global talent pool and drive your business forward.

The challenge with direct international hiring

Before we explore the benefits of a no-entity approach, it’s crucial to understand the challenges of hiring talent directly in another country, even on a temporary basis. For growing businesses, these hurdles can halt expansion before it even begins.

• Complex entity registration: Setting up a legal entity in a new country is a minefield of bureaucracy and delays. The process can take months, drain resources, and distract you from your core business goals.
• Navigating foreign laws: Employment laws vary drastically between countries. From contracts and termination rules to working hours and leave entitlements, staying compliant is a full-time job. A single misstep can lead to significant legal and financial penalties.
• Payroll and benefits headaches: Managing payroll and benefits in a country where you have no expertise is a high-risk game. Different tax systems, National Insurance (NI) contributions and mandatory benefits create a complex web that is easy to get wrong.

These challenges aren’t just inconvenient; they’re significant risks that can expose your business to unforeseen costs and legal disputes, stifling your ability to scale with confidence.

How an Employer of Record (EOR) simplifies global expansion

An Employer of Record service is the solution to these expansion roadblocks. An EOR acts as the legal employer for your international team members, handling all HR, payroll and compliance duties on your behalf. This allows you to tap into global talent pools quickly and efficiently.

Here’s how an EOR transforms your approach to building a global team:

Compliance

An EOR gives you immediate access to local expertise. Instead of spending months researching labour laws, you can rely on your EOR partner to ensure every hire is compliant. They manage:

• Compliant employment contracts: Creating locally compliant contracts that protect both your business and your employees.
• Adherence to labour laws: Managing all aspects of local regulations, from minimum wage and overtime to termination procedures.
• Risk mitigation: Minimising your exposure to legal disputes and penalties by ensuring every aspect of employment is handled correctly.

Streamlined and accurate payroll

Payroll errors are costly. The risk of mistakes multiplies when operating in an unfamiliar country. An EOR processes payroll accurately and on time, based on your instructions, while handling all the complexities. This includes calculating correct tax contributions, managing National Insurance contributions and ensuring compliance with local payment laws. You get the peace of mind that your team is paid correctly, every single time.

A unified employee experience

You want your entire team to feel connected, regardless of their location. Using different systems for international employees creates confusion and a disconnected culture. An all-in-one platform that integrates with an EOR service allows you to manage everyone under one roof. With a solution like Employment Hero, you can handle leave, documents, expenses and performance for your entire global workforce from a single interface. This creates a consistent and inclusive experience for all team members.

Significant cost and admin savings

Establishing and maintaining legal entities is expensive. The no-entity model, made possible by an EOR, drastically cuts overhead costs. You avoid the high fees associated with entity setup, legal consultations, and ongoing administrative burdens. An EOR centralises tasks like payroll, benefits administration and HR management, freeing up your team to focus on strategic growth initiatives instead of manual paperwork.

Access to unrestricted talent pools

Why limit your talent search to one city or country? By partnering with an EOR, you can hire the best person for the job, wherever they are. This access to diverse skills, experiences and perspectives enhances innovation and makes your business more adaptable. You can respond faster to market changes and customer needs, giving you a powerful competitive advantage.

When do you still need to set up a local entity?

While the EOR model is a game-changer for many businesses, it’s not a universal solution for every situation. Certain business activities may still require you to establish a physical and legal presence.

For example, companies involved in industries like manufacturing, physical retail or certain regulated professional services often need local facilities, storefronts or specific licenses to operate. If your business model requires a physical footprint to produce goods or serve customers directly, setting up a formal corporate entity may be unavoidable. It’s essential to evaluate your long-term strategic goals and operational needs to determine the right path for your expansion.

Hire top talent anywhere with HeroForce 

In an era of digital connectivity, relying on an Employer of Record offers a compelling and powerful alternative to traditional methods of building a global team. It empowers you to grow faster, smarter and with greater confidence.

HeroForce is Employment Hero’s Employer of Record service. We enable you to hire talent in over 180 countries, simplifying your expansion while ensuring everything is done legally and ethically.

Whether you’re expanding into new markets or struggling to fill critical roles, we connect the best talent with the best employers.

Making Tax Digital (MTD) for Income Tax is being introduced in April 2026.

HMRC is again allowing limited exemptions, as it did with MTD for VAT seven years earlier. Some people are excluded automatically, while others can apply if they meet the required criteria. Such conditions are known as digital exclusion.

This FAQ breaks down who needs to adopt the new rules, who’s exempt, and how to apply for an exemption.

Here’s what we discuss:

Who has to follow the MTD for Income Tax rules?

MTD for Income Tax applies to individuals who currently file a Self Assessment tax return, such as sole traders and landlords.

It’s being phased in based on gross annual self-employment and property income, as follows:

• From 6 April 2026 for individuals with income over £50,000 for the 2024/2025 year.
• From 6 April 2027 for individuals with income over £30,000 for the 2025/2026 year.
• From 6 April 2028 the government has set out plans to introduce MTD for individuals with income over £20,000.

So, if your total qualifying income (from self employment and property) is above these thresholds, you’ll need to register before the relevant start date. HMRC will have written to you, or emailed, to inform you of this.

Can I opt out of MTD for Income Tax?

MTD for Income Tax is mandatory if you meet the criteria listed above, and HMRC says you must sign-up and follow the rules.

You must then sign-up to MTD, and use MTD-ready software.

The exceptions are if you meet one of the exclusion criteria set out by HMRC, as we discuss below. If these apply to you, you will continue to use Self Assessment.

Who is automatically exempt from MTD for Income Tax?

You’re automatically exempt if you:

• Have qualifying income below the threshold for a given year, or below £20,000
• File returns only as a trustee (including charitable trustees and some pension trustees)
• Have income only from foster care
• Do not have a National Insurance number for the relevant tax year (as at 31 January before the tax year)
• Act as a personal representative for someone who has died
• Are a Lloyd’s underwriter

How do I apply to opt out of MTD for Income Tax if I’m one of those exempted?

If you fall into one of the categories listed above, you should not be required to sign up to MTD. If HMRC contacts you saying you must join, contact them, or speak to your adviser, so they can correct your status.

What is digital exclusion under MTD for Income Tax?

According to HMRC, “digital exclusion” means it is not reasonable or practical for you to use MTD-compatible software.

You will need to apply for this exemption.

There are two main groups:

1. Religious exemption: If you’re a practising member of a religious society whose beliefs prevent you from using electronic communications or digital record-keeping.
2. Practical difficulty, as follows:
   • You have a physical or mental condition that makes digital tools difficult or impossible to use.
   • You live in a remote location with no reliable internet or mobile access.
   • Your age or digital literacy makes it genuinely unreasonable for you to maintain digital records, even with help.

How do I apply for digital exclusion from MTD for Income Tax?

You can apply by calling or writing to HMRC Self Assessment: General Enquiries.

If writing, include the title: “Making Tax Digital for Income Tax digitally excluded application”

In your application, include:

• Your name, address, and National Insurance number
• Details of how you currently complete your Self Assessment
• Whether you use an accountant or agent (and what they do)
• An explanation of why you believe you’re digitally excluded
• Any supporting evidence (e.g. medical letter, proof of no internet access)

Can someone else apply on my behalf for an exemption from MTD for Income Tax?

Your accountant, or a trusted friend or family member can apply for an exemption on your behalf.

You’ll need to authorise them first by contacting HMRC in writing or over the phone.

When should I apply for digital exclusion from MTD for Income Tax?

It’s advisable to apply well before MTD applies to you:

• For 2026: apply now to ensure HMRC processes your request in time.
• For 2027: apply from summer 2026.
• For 2028: apply from summer 2027.

HMRC aims to respond within 28 days, though it may take longer if information is missing from your application.

Bear in mind that, as each April approaches, HMRC’s phone lines will be increasingly busy not only with people calling about MTD, but also those needing help with ongoing Self Assessment completions.

What evidence will HMRC need to grant an exemption from MTD for Income Tax?

HMRC will expect a clear, reasonable explanation supported by evidence where possible, such as:

• A doctor’s note confirming a medical condition.
• A letter from a broadband provider or local authority confirming no network service in your area.
• A description of your religious beliefs and how they prevent digital record-keeping.

Do I need to keep digital records if I’m exempt from MTD for Income Tax?

If HMRC grants you an exemption, you’ll continue using the normal Self Assessment process, filing an annual tax return in the usual way.

Therefore, the requirement to keep digital records will not apply and you can continue to keep records of any kind provided they meet HMRC’s requirements.

This isn’t to say that doing so is a good idea, however: digital record via accounting software keeping provides significant advantages, from automation and AI assistants, to simply having a better understanding of your cash flow position.

What happens if my application to be exempted from MTD for Income Tax is rejected?

If HMRC rejects your request, you (or those making the application on your behalf) have 30 days to send a written appeal.

The refusal letter you receive from HMRC will provide specific details including the address to send your appeal to.

You or those applying on your behalf should include your reasons and any new evidence that supports your case.

The letter is the start of an appeal, just like any other with HMRC, potentially moving onto an HMRC internal review and ultimately a tribunal if no mutually acceptable decision is reached.

I have a disability but HMRC says I’m not exempt from MTD for Income Tax. What next?

If HMRC doesn’t grant you an exemption, you may still be able to manage MTD using accessible accounting software.

Look for tools with:

• WCAG 2.1 or 2.2 AA compliance
• Strong screen reader compatibility (e.g. JAWS, NVDA, VoiceOver)
• Keyboard navigation and adjustable contrast, font, and colour settings

You might also qualify for funding through the Access to Work scheme to help cover assistive software or technology costs.

Are seasonal businesses exempt from MTD for Income Tax?

Seasonal or part-time businesses are not excluded if they meet the MTD criteria and HMRC says they must use MTD.

For example, a business that operates only during the Summer may have little or no income for the rest of the year. But MTD for Income Tax is determined based on the total gross qualifying income earned over the entire tax year.

Once your income falls below the threshold for three consecutive tax years, you can apply to HMRC to exit the MTD system. This time period delay is designed to avoid businesses with inconsistent income from constantly going in and out of the system.

If I’m excluded from MTD for VAT, am I automatically excluded from MTD for Income Tax?

If you’re digitally excluded from MTD for VAT because of digital exclusion and your circumstances haven’t changed, you should contact HMRC by phone or in writing to confirm the same exclusion for MTD for Income Tax.

If your VAT exemption was due to insolvency, however, this doesn’t extend to Income Tax.

I usually file paper returns for Self Assessment. Does that mean I’m exempt from MTD for Income Tax?

Filing paper returns in the past doesn’t automatically make you exempt.

HMRC won’t grant an exemption from MTD for Income Tax just because you prefer paper.

Does HMRC accept temporary illness as a reason for exemption from MTD for Income Tax?

If a temporary health condition (e.g. recovering from surgery) or major life event (like a recent bereavement) makes digital filing unreasonable, you can apply for an exemption. HMRC reviews all requests on a case-by-case basis.

This type of exemption is generally temporary, and HMRC may require you to start following MTD once your circumstances improve.

Am I exempted if I can’t afford MTD for Income Tax’s requirements?

Cost alone isn’t a valid reason for exemption. However, it might support your claim when combined with other factors like age or health issues.

The good news: HMRC-approved software providers are expected to offer free or low-cost versions for eligible small businesses and landlords.

As of publication of this article, there’s only one: Sage Individual is Sage’s free, easy to use cloud accounting software designed for sole traders and landlords to manage income, expenses, and MTD for Income Tax submissions in one place.

Can I apply for exemption from MTD for Income Tax if I live abroad but file UK Income Tax?

If you’re a non-resident with UK self-employment or property income that exceeds the threshold, MTD for Income Tax applies to you, just like with a UK-resident taxpayer.

You can still apply for a digital exclusion exemption if you genuinely can’t access digital tools abroad, but residency alone isn’t enough to exclude you.

Can my accountant manage MTD for Income Tax for me?

Yes, your accountant can:

• Submit your quarterly updates
• Prepare and file your end-of-year declaration
• Sign you up for MTD for Income Tax

However:

• You remain legally responsible for accuracy.
• You must keep digital records of all income and expenses.
• You need to authorise your accountant correctly with HMRC. You should start a dialogue immediately with them about this.

Can a family member or friend do MTD for Income Tax for me?

Yes, in the following ways:

• They can register as a “trusted helper”, but they’ll have limited access and can’t file or submit on your behalf.
• To give them full access, they must register as a tax agent and be authorised by you. This adds significant complexity.
• You can also appoint someone as an intermediary to deal with HMRC on your behalf, but it does not grant them full access like a registered agent.

What if I don’t follow MTD for Income Tax when I should?

If you don’t follow the MTD rules when you’re required to, HMRC can issue penalties under its points-based system.

Each time you miss a quarterly update, or tax return, you’ll receive one penalty point. Once you accumulate four points, you’ll be charged a £200 fine. Furthermore, you’ll be charged interest on the amount you owe.

Additional penalties also apply if you make late payments.

HMRC offers free live and recorded webinars, along with short instructional videos, to help taxpayers understand MTD (including choosing compatible software).

HMRC also funds several community and voluntary organisations to help people who have difficulty using online services. Groups like the Good Things Foundation offer free, local support and training for individuals facing digital exclusion or barriers to accessing HMRC services.

Are there any other criteria for exemption for MTD for Income Tax?

Businesses under a deputyship, as appointed by the Court of Protection, are permanently exempt from MTD.

This builds on the Spring Statement 2025 announcement that individuals who have a lasting or enduring Power of Attorney in place are also exempt. (This is a specific exemption group defined by HMRC and it isn’t necessarily the case that all Power of Attorney cases are always exempt from the digital requirement.)

Final thoughts

MTD for Income Tax marks a major shift in how self employed taxpayers and landlords interact with HMRC, but not everyone will need to make the change.

If you think you might be excluded, apply early, keep records of your correspondence, and seek help from your accountant or HMRC’s support services. Or speak to your accountant or bookkeeper so they can act on your behalf.

By taking action now, you’ll know exactly where you stand and avoid unnecessary stress when MTD for Income Tax comes into effect.

For many sole traders and landlords, the April 2026 start date for Making Tax Digital (MTD) is approaching fast.

Recent government announcements introduce a welcome “soft landing” period with penalty relief, designed to smooth your transition to digital recordkeeping and quarterly submissions.

This article will break down these crucial HMRC MTD for Income Tax updates, explaining how to take advantage of the MTD for Income Tax soft landing period. We also take a look at how the new penalty point system works.

Here’s what we cover:

Key provisions: What penalty delays have HMRC announced for MTD for Income Tax?

The latest updates that arrived with the 2025 Autumn Budget bring welcome clarity and flexibility, designed to make your initial steps with MTD for Income Tax significantly more manageable.

1. First-year penalty relief for quarterly updates

HMRC has confirmed that, for taxpayers mandated for MTD for Income Tax from April 2026, late submission of the first four quarterly updates will not attract penalty points, provided other conditions are met.

These cover quarterly updates due on:

• 7 August 2026—covering the period 6 April 2026 to 5 July 2026
• 7 November 2026—covering the period 6 July 2026 to 5 October 2026
• 7 February 2027—covering the period 6 October 2026 to 5 January 2027
• 7 May 2027—covering the period 6 January 2027 to 5 April 2027

The periods above will run from the 1st of each month if you’ve previously arranged with HMRC to use calendar months for your basis period, as some businesses have in order to match with their VAT stagger.

This penalty relief does not apply to your end-of-year MTD tax return for 2026/27, which is due by 31 January 2028. Penalties will apply for late submission of this final, annual declaration.

To be clear, once you’ve started MTD for Income Tax, from year two onwards penalties will apply for late submission of quarterly updates for the following dates and beyond:

• 7 August 2027—covering the period 6 April 2027 to 5 July 2027
• 7 November 2027—covering the period 6 July 2027 to 5 October 2027)
• 7 February 2028—covering the period 6 October 2027 to 5 January 2028)
• 7 May 2028—covering the period 6 January 2028 to 5 April 2028)

Furthermore, the government has not confirmed if the soft landing period will apply to those starting MTD for Income Tax in April 2027 (for the £30,000 gross qualifying income threshold), or April 2028 (for the £20,000 gross qualifying income threshold). We may learn more as those dates approach, but nothing is certain.

What this means for those starting MTD for Income Tax in April 2026: This provision offers a crucial grace period.

It’s your opportunity to learn the ropes of MTD-compatible software, refine your digital recordkeeping processes, and understand the quarterly submission routine without the immediate pressure of penalty points.

Just remember that HMRC still expects you to maintain digital records from April 2026 and submit quarterly updates.

So, think of it as an opportunity to iron out any creases in your new system.

2. Extended grace period for late payments

During your first year in the new penalty system, HMRC will, in the first year, allow up to 30 days before late payment penalties arise under the new regime, although interest on unpaid tax may still run.

What this means: This enhanced grace period provides invaluable flexibility for your cash flow management. As you adapt to potentially new ways of monitoring your tax liability, it allows you a little more time to ensure funds are available without incurring immediate penalties.

3. Deferrals and exemptions for specific groups

Recognising unique circumstances, some taxpayer groups will have their start date deferred or be permanently exempt from MTD:

• One-year deferral (until April 2027): This applies to recipients of trust and estates income, individuals who use averaging adjustments, those eligible for qualifying care relief, and non-UK resident foreign entertainers or sportspeople. If you fall into one of these categories, and are theoretically required to use MTD as of April 2026, you should continue to meet your existing Self Assessment obligations as usual until April 2027.
• Permanent exemptions: Businesses under a deputyship, as appointed by the Court of Protection, are now permanently exempt from MTD. This builds on the Spring Statement 2025 announcement that businesses who have a Power of Attorney are also exempt. If you fall under these criteria, you have clarity on your permanent exclusion from MTD requirements.

4. Policy and guidance updates

The journey to full MTD implementation is ongoing, so staying informed is key:

• Legislation for the MTD for Income Tax updates will be introduced in the Finance Bill 2025-26.
• HMRC guidance will be updated shortly to reflect the new penalty easements and deferrals.
• HMRC will soon provide an update on its plans to resolve the last few restrictions preventing certain taxpayers from signing up for mandatory MTD.

Why you should embrace MTD for Income Tax’s benefits now

Some may find the idea of quarterly updates onerous, but the core design of MTD is to provide you with a much clearer, more real-time understanding of your financial position.

Embracing MTD offers significant benefits that can genuinely transform your business’s financial health and decision-making.

• By regularly updating your digital records and making quarterly updates, you gain a live snapshot of your income, expenses, and crucially, your approximate tax liability. This eliminates the end-of-year scramble and the dreaded surprise tax bill.
• Improved cash flow management: When you know roughly how much tax you’ll owe, you can put money aside consistently. This allows for far better financial planning, so you aren’t guesstimating your tax bill and risking a shortfall when it comes to buying a new van, investing in equipment, or simply covering personal expenses.
• Accurate, up-to-date financial data also empowers you to make smarter business decisions. You can identify trends, understand your profitability throughout the year, and react promptly, rather than waiting for your accountant to crunch numbers months later.

The risks of ignoring quarterly updates for MTD for Income Tax for the first year

It’s not unnatural to think that, because there’s no penalties for late submission, you can simply ignore the first four quarterly updates, and simply file a digital tax return on 31 January 2028.

While the penalty relief offers you flexibility, Chris Downing—Director of Accountants and Bookkeeping at Sage and a former accountant—offers a warning against postponing your MTD preparations:

“Firms shouldn’t mistake the soft landing for a free pass. The compliance obligations are still in force—digital recordkeeping, timely quarterly updates, and the full MTD Tax Return by January 2028. All the soft landing does is give you space to make mistakes safely. Ignoring that opportunity simply concentrates the risk later.”

If you use the penalty easement to deliberately skip updates or do a superficial job of record-keeping, you will also cheat yourself out of vital benefits:

• You lose real-time visibility of your business, undermining the core advantage MTD offers for your cash flow and business planning.
• Delaying the inevitable learning and compliance merely pushes the problem down the road. You’ll still have to switch to digital records and make sense of the system eventually, likely under more pressure. By then, the penalty-free soft landing period will have ended.
• Grappling with a new system at the last minute significantly increases your risk of making errors or missing deadlines. Once the soft landing period concludes, the standard penalty regime takes full effect. Why not use this current grace period to master the system and build confidence, rather than deferring the pain and inviting potential penalties?

Understanding the new penalty system for MTD for Income Tax

It’s important to have a clear grasp of the penalty points system, which will be rolled out not only for MTD users but also for all Self Assessment taxpayers from April 2027.

Under the new system, simply filing a return late no longer triggers an automatic fine.

Instead, you’ll receive one penalty point every time you miss a submission deadline. This penalty applies only to the particular tax for which you’ve made the error. For example, if you miss an update for MTD for Income Tax, you might get penalty points. If you also miss a tax return date for VAT, you might also get points—but the two systems and points tallies are entirely separate.

Once you accumulate a certain number of these points—known as your personal points threshold—HMRC will then issue a £200 financial penalty. Every subsequent late submission will then incur an additional £200 charge.

Your points threshold depends on how often you’re required to submit returns.

Businesses that file more frequently have more opportunities to make mistakes, so their threshold is higher. For example, if you file annual tax returns, you’ll receive a penalty at two points. For quarterly filers, the penalty is issued at four points, and monthly filers have a threshold of five points.

These penalty points don’t stay on your record indefinitely. They expire after a period of good compliance, provided you’ve also submitted any outstanding returns. The length of this good compliance period also varies by your filing frequency. If you file annual tax returns, you’ll need to file on time for 24 months to clear your record. Quarterly filers must file on time for 12 months, and monthly filers need to file on time for 6 months.

Overall, this new system is designed to be more forgiving of genuine, one-off mistakes, giving you a chance to improve. However, it still takes persistent lateness seriously.

Preparing for MTD: What you should do now

Your first step is to determine your MTD start date.

Confirm if your business is mandated for April 2026 or April 2027 (based on the MTD thresholds), or if you qualify for a deferral or permanent exemption. This will set your personal timeline.

Evaluate your systems. Are you still using spreadsheets or a basic accounting system to manage your income and expenses? Assess how digital-ready your current methods are and identify what changes are needed.

Explore MTD-compatible software. Begin researching available software solutions that integrate with MTD for Income Tax. Many providers offer specific tools for sole traders. Consider trialling different options to find one that fits your workflow best.

Consider voluntary sign-up: You don’t have to wait until April 2026, and can choose to voluntarily sign up for MTD now. This offers an excellent dry run opportunity. By starting early, you can become familiar with digital record-keeping and quarterly submissions, gaining valuable experience and confidence with the new system—and you’ll still benefit from the soft landing period across 2026 and 2027 (if you are in the 2026 mandation cohort and the current easements remain in place). This early start is a fantastic way to refine your processes before mandatory adoption, ensuring you’re well-prepared from day one.

Don’t hesitate to consult an accountant or tax advisor for professional advice. They can provide tailored guidance, help you choose and implement the right software, set up your new digital systems, and help you create a strategic plan for a smooth transition during the soft landing period.

Final thoughts

The MTD for Income Tax journey for April 2026 is clearly defined, but the latest government update has transformed the transition. But this MTD soft landing isn’t a delay—it’s a vital opportunity. With new flexibility around penalties and payment deadlines for 2026, sole traders and landlords now have a unique chance to prepare effectively.

By proactively preparing your digital systems, and potentially even opting for a voluntary “dry run” now, you can transform the challenge of MTD into an opportunity. Embrace this extra time to plan ahead, seek expert advice, and transition to digital record keeping with confidence. Ultimately you will benefit from a clearer, more efficient view of your business’s finances.

Expanding your business into new markets is a powerful growth strategy. But hiring talent globally introduces a maze of new employment laws, payroll complexities and risks. Many businesses turn to partners like a Professional Employer Organisation (PEO) or an Employer of Record (EOR) like HeroForce to help navigate this.

While both services handle HR functions, they operate differently and the distinction is critical. Understanding the difference between a PEO and an EOR can be the key to unlocking seamless global growth while protecting your business from significant risk.

This guide breaks down the differences and explains why an EOR is the smarter, safer way to build your global team.

What is a Professional Employer Organisation (PEO)?

A Professional Employer Organisation (PEO) offers outsourced HR services like payroll processing, benefits administration and compliance assistance. When you partner with a PEO, you enter into a co-employment relationship.

In this model, the PEO becomes the administrative employer for your staff, while you remain the day-to-day employer responsible for managing their work and performance.

The catch? To use a PEO in a new country, your business must have its own local legal entity established there. This requirement adds significant cost, time and administrative burden to your expansion plans, often defeating the purpose of seeking a simple solution.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) offers a more direct and secure path to hiring international talent. An EOR allows you to hire employees in another country without needing to set up a local entity.

The EOR acts as the legal employer for your team members in that country. They handle all aspects of the employment relationship, from contracts and payroll to taxes, benefits and adherence to local labour laws. You still manage your employees’ daily tasks, projects and performance, maintaining full operational control.

By taking on the full legal responsibility, an EOR eliminates the complexities and risks of global employment, empowering you to hire the best talent, anywhere.

Key differences: PEO vs. EOR

Understanding the key differences between PEO and EOR will help you to determine which solution is right for your business. We’ve developed a comparison table below to help to decide. 

Feature	Employer of Record (EOR)	Professional Employer Organisation (PEO)
Local entity	Not required. The EOR uses its own entity.	Required. You must set up your own legal entity.
Employment model	EOR is the sole legal employer.	Co-employment model. You and the PEO share liability.
Risk and liability	EOR assumes full legal employment liability.	Liability is shared, creating a “co-employment” risk.
Best for	Global expansion and hiring talent in new countries.	Outsourcing HR for existing employees in a country where you have an entity.
Compliance	Compliance management handled by the EOR.	Compliance support, but ultimate responsibility is shared.
Speed	Hire and onboard talent in days.	Slow process due to entity setup requirements.

The co-employment risk and why it matters

The co-employment model used by PEOs is one of the biggest differentiators—and a source of significant risk. In a co-employment arrangement, both your company and the PEO are considered employers. This shared status means you also share legal liability for employment matters.

If the PEO makes a mistake with payroll, misinterprets a local law or fails to provide statutory benefits, your business can be held responsible. This exposes you to potential fines, legal disputes and reputational damage in a foreign jurisdiction.

An EOR eliminates this risk. As the sole legal employer, the EOR takes on 100% of the employment liability. They are the ones responsible for ensuring every contract is compliant, every payslip is accurate and every local regulation is met. This clear division of responsibility gives you peace of mind and lets you focus on running your business.

Why an EOR is the smarter choice for global growth

For businesses looking to scale with confidence, an EOR provides a clear advantage. It’s a model built for speed, simplicity and security.

1. Avoid the cost and complexity of entity setup

Establishing a legal entity in a new country is a monumental task. It can take months, sometimes even over a year, and cost tens of thousands of dollars in legal and administrative fees. It requires navigating unfamiliar corporate laws, tax systems and banking regulations.

An EOR bypasses this entire process. You can tap into their existing global infrastructure to hire talent immediately. This saves you an enormous amount of time and money, allowing you to be agile and responsive to market opportunities. Instead of waiting to get set up, you can have your first international employee onboarded in a matter of days.

2. Minimise risk with watertight compliance

Global employment laws are complex and constantly changing. From termination rules and leave entitlements to mandatory benefits and data privacy, staying compliant across multiple countries is a full-time job. A single misstep can lead to severe penalties.

A trusted EOR partner has teams of local experts that live and breathe the employment laws in their respective countries. They ensure every aspect of employment is handled, from drafting contracts to managing statutory contributions and navigating complex termination procedures. This reduces the compliance burden from your shoulders.

3. Hire the best talent, no matter where they are

The modern workforce is global. Restricting your hiring to your local market means missing out on a world of exceptional talent. An EOR breaks down geographical barriers, giving you the freedom to hire the perfect candidate for the role, regardless of their location.This allows you to:

• Access specialised skills: Find experts in their field who may not be available in your home country.
• Build a diverse team: Foster innovation and a stronger company culture with a globally diverse workforce.
• Retain top performers: Keep valuable employees who need to relocate, ensuring you don’t lose institutional knowledge.

When a PEO might still make sense

While an EOR is the strong solution for global expansion, a PEO can still be useful in specific situations. If your business already has an established legal entity in a country and simply wants to outsource HR administration for your existing employees there, a PEO can be a viable option.

In this scenario, you are not looking to expand, but rather to streamline operations in a market where you are already established. However, for any business looking to enter a new market, the EOR model is unequivocally the faster, safer and more efficient choice.

Scale confidently with Employment Hero

Hiring great people is the foundation of business growth. Don’t let borders and bureaucracy stand in your way. An Employer of Record removes the barriers to global hiring, transforming a complex challenge into a simple, streamlined process.

Our HeroForce EOR service empowers you to hire top talent across the globe without the risk and administrative headache. We handle the complexities of international employment so you can build your dream team and scale your business with confidence.

Hiring great people is one of the most powerful ways to grow your business, but it’s also one of the toughest. Finding top talent in a competitive market requires speed, precision and a seamless process that doesn’t bury you in administrative tasks. We get it. That’s why we’ve completely revamped our Applicant Tracking System (ATS) to make recruitment simpler, faster and more effective.

We’re excited to announce a suite of major updates to our ATS, packed with powerful new features designed to streamline your entire hiring workflow. Say goodbye to manual data entry and disjointed systems. Say hello to a single, integrated platform that empowers you to find, manage and hire the right people with confidence.

These updates are built to solve the real-world challenges growing businesses face. Let’s explore what’s live, what’s coming soon and how it will transform your recruitment process.

Build better ads with simplified Job Creation

Launching 1 Dec 2025

Crafting a compelling job ad is an art. It needs to be informative, engaging and structured to attract and match the right talent. Our new simplified Job Creation tool streamlines this process, guiding you through each step to build effective job ads quickly.

The redesigned, 2 step workflow makes creating and posting jobs foolproof, and way faster. It starts with a natural language search – simply input exactly what you’re looking for in simple terms, and our AI will populate all the required fields and build out a suggested job description, optimised for applicant matching. Looking to use your own job description? You can paste it in and the AI will suggest amends to the description to improve clarity and applicant matching. From defining the role and responsibilities to setting salary expectations and required skills, the intuitive interface ensures nothing is missed.

Once you’re happy with your description, the AI will suggest screening questions, whilst keeping a preview of the Job Description in place.

This structured approach helps you create consistent and professional job ads every time, improving the quality of applications you receive. It takes the guesswork out of writing job descriptions, allowing you to focus on showcasing your company culture and the unique opportunity you’re offering.

Post once, reach millions with new Indeed integration

Live now

Sourcing candidates is the first, and often most time-consuming, step in recruitment. To attract a wide pool of talent, you need to post your job openings where candidates are actively looking. That’s why our biggest update is a direct integration with Indeed, the world’s #1 job site.

Gone are the days of manually posting jobs on multiple platforms. With our new integration, you can access:

• Free Indeed adverts: all live jobs on careers pages are posted to Indeed as free ads
• Integrated screening questions: questions set up in EH are integrated to the Indeed application process for faster shortlisting
• One-click applications: Indeed candidates can apply with a single click, increasing applicant volumes
• Manage applications in one place: All applications from Indeed flow directly back into your Employment Hero ATS, eliminating the need to track candidates across different systems.

This seamless connection saves you countless hours and expands your reach exponentially. It automates the most tedious part of sourcing, freeing you up to focus on what truly matters: connecting with qualified candidates.

Making it easier for candidates to find you: EH Jobs upgrades

Live now

Our own jobs board, Employment Hero Jobs, has also received significant upgrades, and is now placing more than 1300 candidates into our customers’ jobs every single month. These candidates are placed free of charge with our customers, saving thousands in job ads. 

With improved search functionality, job matching and a better user interface, it’s now easier than ever for candidates to discover and apply for roles at your company. This provides another valuable channel for attracting applicants, for free and free of the clutter and ads on traditional jobs boards. 

SmartMatch applicant ranking gets a power-up

Live now

How do you quickly identify the most promising candidates from a large pool of applicants? Our SmartMatch technology does the heavy lifting for you. It automatically analyses resumes and application data, then ranks candidates based on how well their skills and experience align with your job requirements. 

This powerful feature allows you to ‘Sort by best match’, to help you prioritise your efforts, ensuring you review the most qualified individuals first.

Upgraded CV parsing means more complete candidate profiles, and detailed summaries of how well individuals match your specific criteria for faster decision making.

Take control with enhanced Applicant Management

Live now

Once the applications start rolling in, speed and clarity matter. A messy or outdated interface does not just slow you down; it puts strong candidates at risk of slipping away. Our modernised Applicant Management experience gives you sharper visibility, faster actions and more confidence as you move candidates through the hiring journey.

We have redesigned the workflow to feel cleaner, smarter and more connected. Whether you are triaging dozens of applicants or refining a shortlist, everything you need sits right where you expect it.

Key updates in the new Applicant Management system include:

Quick action toolbar and action pane: Complete essential tasks without losing sight of the candidate. Notes, activity, communication, scheduling and evaluation now live side by side with the profile, so decisions happen in one place.

Board view: Switch to a visual overview of your entire hiring process. Every stage. Every candidate. Drag and drop moves them forward with ease, giving you instant situational awareness.

Candidate filtering: Zero in on the people who can truly work for you. Filter by SmartMatch score or screening question responses to quickly exclude dealbreakers and focus your energy where it counts.

Candidate search: Every role now includes a powerful search bar. Find applicants by name, email, skills, certifications, education, past companies, job titles or industries in seconds.

Updated stage view: The refreshed stage view makes shortlisting faster, with SmartMatch scoring and key profile highlights surfaced clearly, plus smoother navigation and quick actions for high tempo workflows.

Updated profiles: Candidate profiles are cleaner and easier to scan, with richer information parsed directly from resumes so you can understand each person at a glance.

This is not just a visual refresh; it is a practical upgrade designed to help you work faster and stay organised. High volume applicant review becomes manageable, focused and far less chaotic, giving every strong candidate the attention they deserve and giving you a hiring process that genuinely keeps up.

Automate first-round interviews with Recruitment Agent 

Live now for EOS Unlimited customers

Reduce your hiring bottlenecks with our new Recruitment Agent, your new AI colleague that revolutionises the first-round interview process. Fully integrated into the Employment Hero ATS, this powerful feature automates structured video screening, taking the manual grind off your plate. 

Hire faster with pre-vetted shortlists: By automating first-round screening, you cut through the noise and get to a list of interview-ready candidates sooner. Early results show a 50% reduction in screening time, and a week saved on time to hire.

Make smarter, more consistent decisions: By using standardised questions and transparent scoring rubrics for every applicant, it ensures your evaluations are objective and evidence-based. This data-backed approach makes it easier to compare candidates fairly and gives your entire hiring team the confidence to make better, more informed decisions.

Create a fair and scalable process: Every candidate receives the same fair and structured experience, regardless of whether you have 10 applicants or 1,000. This consistency reinforces your reputation as a fair and transparent employer, helping you attract top talent.

Find out more about our Recruitment Agent features. 

Start hiring smarter today

The world of work is changing, and your recruitment tools should empower you to stay ahead. The relaunched Employment Hero ATS is more than just a new set of features; it’s a complete solution designed to help you build a winning team. By automating manual tasks, expanding your reach and providing clear insights, we’re giving you the power to hire more efficiently and effectively.

These updates are built to reduce your administrative burden, ensure a great candidate experience and ultimately, help you secure the talent you need to grow your business.

Ready to transform your hiring process? Explore the new features in our Applicant Tracking System and discover a better way to recruit.

Set clear expectations this holiday season with our office closure messages and out-of-office email templates designed for smooth shutdowns.

Every year, as the calendar edges toward December, workplaces quietly prepare for the great annual inbox exodus. It’s one of the few moments in modern work culture where everyone collectively agrees, even if only for a week or two, that rest is not a luxury but a necessity.

And yet, before anyone can properly disconnect, there’s one small ritual that stands between us and true holiday bliss: crafting the perfect “office closed” or out-of-office message.

That’s why we’ve curated a set of updated, easy-to-use templates to help you clearly communicate your downtime, whether your workplace leans buttoned-up, playful or somewhere in between. From general out-of-office messages to Christmas shutdown notices and public holiday reminders, these examples will help you set expectations, reduce confusion and actually switch off.

In this guide, you’ll find:

• General out-of-office templates
• Office closed for Christmas templates
• Office closed for public holidays
• Year-end vacation announcements
• Tips for managing holiday shutdowns smoothly

Generic Out-of-Office Message Template

Setting an out-of-office reply isn’t just polite, it’s functional. It ensures colleagues know when you’re offline, avoids unnecessary follow-ups and prevents misunderstandings. But it’s also a boundary-setting practice that supports healthier work habits.

Formal

Hi there,

Thank you for your email. I’m currently on leave from [date] to [date] for [reason] and will have limited access to email. Please expect a delayed response.

For urgent matters, contact [colleague name + job title] at [email / phone]. Otherwise, I’ll reply once I’m back.

Kind regards,

[Name]

Informal

Hello!

I’m currently out-of-office and officially offline until [date]. I won’t be checking emails — that’s a promise I’m making for both of us.

In the meantime, here are a few fun facts to keep you entertained:

• Koala fingerprints can fool human investigators.
• The “code rain” in The Matrix was inspired by sushi recipes.
• Earth has more trees than the Milky Way has stars.

For anything urgent, contact [name + job title] at [email / phone]. I’ll be in touch when I return.

Thanks!

[Name]

Office Closed for Christmas Message Template

If your company observes a Christmas shutdown, communicating it early helps prevent confusion and keeps customer expectations clear. Even during holidays, business doesn’t fully pause but clear messaging ensures your team can.

Formal

Hello,

As we approach the festive season, our office will be closed from [date] to [date]. Our team will be taking this time to rest and spend the holidays with family and friends.

Response times may be slower during this period. For general enquiries, visit our [Help Centre link]. For urgent matters, contact [name + job title] at [email / phone].

We’ll return on [date] and will review all messages promptly.

Wishing you a safe and joyful holiday season.

Informal

Season’s greetings!

Our team is offline from [date] to [date], enjoying festive treats and a much-needed break before the new year.

We’ll be back on [date]. For anything urgent, please reach out to [name + job title] at [email / phone], they’re keeping the lights on while we recharge.

Happy holidays!

Office Closed for Public Holidays Template

Use these for any public holiday throughout the year.

Formal

Hello,

Our office will be closed on [date] for [public holiday]. Response times may be slower during this time.

If your query is urgent, please visit our [Help Centre link] or contact us once we return.

Thank you for your understanding.

Kind regards,

[Name]

Informal

Hey there,

I’m currently offline for [public holiday] and will be back on [date].

If you need help urgently, contact [name + job title] at [email]. Otherwise, I’ll respond when I’m back.

Cheers,

[Name]

Annual Year-End Vacation Template

A longer break calls for clarity, especially when you’re stepping away from your inbox entirely.

Formal

Hello,

Thank you for your email.

I’m currently on annual leave and won’t be able to access emails until [date]. For urgent matters, please contact [name + job title] at [email / phone].

I’ll respond when I return.

Wishing you a safe and happy holiday season,

[Name]

Informal

Hello!

I’m off on my long-awaited annual holiday from [date] to [date], and won’t be checking emails during this time.

For anything urgent, my colleague [name] is available at [email].

Wishing you a wonderful festive season and a Happy New Year,

[Name]

Helping You Switch Off, Properly

With these templates in hand, setting holiday boundaries becomes much easier and far more intentional. Download the fact sheet to access our full suite of messages and practical advice for managing shutdown periods with confidence.

Managing leave doesn’t need to be complicated. With the right tools (like Employment Hero), you can streamline processes, support wellbeing and give team members the break they deserve without the administrative stress.

If you’d like an even more opinionated or columnist-style rewrite, I can do that too.

[ends]

MTD for Income Tax isn’t a technical tax issue. It’s about workflow.

If you understand this and treat it like an operational project, rather than compliance event, you’ll stay calm next April.

This is what chartered accountant and long-time HMRC collaborator Rebecca Benneyworth discussed at the Bookkeepers Summit, and it’s what we discuss in this article.

Here’s what we cover:

MTD: The operational reality

Benneyworth did something unusual for an MTD keynote session: she skipped the theory entirely.

She skipped the slides about legislative history. She ignored the abstract timelines. She didn’t open with “MTD is coming” or show a single chart about digital transformation.

Instead, she went straight to the operational reality accountants and bookkeepers will face in 2026: The real-world decisions, system limits, client behaviours and workflow bottlenecks that HMRC guidance rarely spells out.

Benneyworth has spent close to a decade touring the UK with HMRC, answering hundreds of questions from firms trying to navigate MTD for Income Tax.

If treat it like an operational project, rather than compliance event, you’ll stay calm next April.

Everyone else will be queuing for HMRC support, battling mismatched authorisations, or scrambling to onboard clients who left everything until the last minute.

What Benneyworth shared wasn’t theory. It was the distilled reality of practitioner experience.

The 10 questions she gets asked most often, the hidden operational risks inside the agent services account, the new easement for jointly owned property that finally makes sense, and the three-month window between now and April that will determine whether your 2026 is manageable or miserable.

This is your road map for staying out of the chaos.

1. Who needs to join MTD for Income Tax in April 2026, and how is the income test really calculated?

The single most common point of confusion is also the easiest to fix.

Practitioners still over complicate the £50,000 threshold. They bring in salary, pensions, dividends, and investment income. These are income types HMRC doesn’t even look at for this test.

But once you strip the noise away, mandation rests on just two numbers.

The truth: only two income types matter:

• Self employment income (SA103)
• Property income (UK + foreign) (SA105 / SA106)

That’s it.

Benneyworth calls them mandated income types. HMRC calls them relevant income. But they are the same thing. And understanding them early shapes your entire 2026 workload.

How the test works:

• You look at the 2024/25 tax return.
• You total the gross income on SA103 + SA105/106—the figures HMRC can actually see.
• If that combined figure is over £50,000, they are in MTD from April 2026.
• If it’s below, they’re not, regardless of what their salary or dividends look like.
• Once in, they’re typically in for three years unless all mandated income sources cease.

What you should do now:

• Build an internal list: every client with SA103 or SA105/106 pages.
• Add a column for “expected 2024/25 mandated income”.
• Segment clients as: “in from April 2026”, “likely in 2027/28”, or “out”.
• Train staff to answer this question the same way,

We only look at your self-employment and property income on the 24/25 tax return. That’s what determines whether you’re in.

Rebecca Benneyworth, Rebecca Benneyworth & Co

This removes most of the noise you get from clients comparing themselves to friends or reading generic online guidance.

2. What about partnerships?

Partnership is one of the most misleading words in the whole MTD for Income Tax conversation.

Clients use it casually, HMRC uses it technically, and it’s easy to mix the two.

Getting this distinction right now prevents you from incorrect scoping your 2026 work—or overlooking clients who are in scope when they think they’re not.

Where partnerships stand today:

• Partnerships are not included in the 2026 MTD mandation rules.
• They will come in later. Benneyworth’s informed guess: around 2030.
• Until then, partners report their share of partnership income via the SA104, as now.

Property “partnerships”—many clients describe joint lets as partnerships. HMRC usually does not.

Quick filter:

• Does it have a UTR (Unique Taxpayer Number)?
• Do you file a partnership return (SA800)?

If yes, then it’s real partnership and therefore not relevant for MTD in 2026.
If no, then it’s jointly owned property and it’s in scope for MTD if income is high enough.

What you should do:

• Clearly tag each client: real partnership (SA800) vs joint property.
• Don’t assume “property partnerships” are out just because the word is used casually.
• Plan 2026 workloads around individuals with SA105, not partnership SA800s.

3. Can clients avoid MTD by incorporating or forming partnerships?

A few accountants and bookkeepers still hope so. Benneyworth’s view was blunt: no, and please don’t try.

Some clients still believe MTD can be sidestepped with a quick incorporation or a “paper partnership.”

The reality: these routes create more admin, more risk, and no genuine escape from future mandation.

Why it doesn’t work:

• Incorporation adds more admin, more identity verification, more filings, and more risk.
• Partnerships will be included in MTD in the near future.
• Your client’s bookkeeping burden doesn’t vanish; it simply moves.

What to advise: push the conversation toward digital record readiness, not legal restructuring:

• “If the bookkeeping is clean, MTD is easy. If it’s not, incorporation won’t save you.”
• “Entity changes should be driven by commercial and tax reasons—not to dodge quarterly updates.”

4. What do I need before I can start filing quarterly updates?

Filing quarterly updates isn’t simply about software. It’s actually an authorisation and infrastructure question.

The two systems HMRC runs (Caesar and the Enterprise Tax Management Platform, or ETMP) can trip you up if your Agent Services Account isn’t correctly linked.

This is where you could lose weeks unnecessarily, so clarity here is critical.

Your two essentials before filing quarterly updates:

• Authority to act for the client. This confirms you’re permitted to manage their tax affairs.

• An Agent Services Account (ASA). This is a special HMRC account, linked to your old Agent Online Services login, that lets you access MTD features and client lists.

How the systems connect:

• The old system (SA (Self Assessment), CIS, PAYE, etc.) runs on HMRC’s Caesar platform.
• The new system (MTD, supporting-agent functionality) runs on ETMP.
• Linking the logins allows ETMP to “see” your existing client list.

If you already do the client’s Self Assessment returns, you become main agent without needing new authority.

If the year end return is handled by another accountant, you request authority as a supporting agent (via a digital handshake).

Supporting agents can sign clients up and file quarterly updates without displacing the main agent.

What you should do now:

• Log into your ASA and check whether your SA credentials are linked.
• Sort out supporting-agent workflows where tax advisers are involved.
• Flag clients with outdated DOB/NI info – this will block the digital handshake later.

5. How do I sign clients up for MTD, and in what order?

Sign-up is where the April bottleneck will happen.

Benneyworth was clear about this: “There’ll be nearly a million people trying to sign-up next April—and most of them will wait until the last minute.”

Your ability to stagger sign-ups, triage clients and test early will determine how much pressure your firm feels in 2026.

Here’s how sign-up works. Inside ASA you should:

• Go to MTD for Income Tax
• Select “Sign-up your client”
• Enter name, DOB, NI number
• HMRC creates the client’s MTD account on ETMP
• From that point, you can submit quarterly updates

You shouldn’t wait. Early sign-ups give you:

• Time to fix mismatches (wrong DOB, NI, name spellings).
• Access to HMRC support while queues are manageable.
• A chance to test year-end functionality before it becomes mandatory.

What to do now:

• Build a staged sign-up schedule:
  • digital-ready clients first
  • high-risk clients next
  • behavioural laggards last
• Create an internal sign-up checklist.
• Start testing the sign-up process now with a handful of safe clients.

6. How many submissions will I be making—and how do penalty points work?

The number of submissions per client is straightforward once you map it to the existing Self Assessment structure. Where you might lose clarity is on penalty points, especially the “one point per quarter” rule that’s easy to miss.

Understanding this now allows you to build a predictable compliance calendar before clients start missing deadlines.

Good news: There’s a grace period, previously referred to as the “soft landing” in the days of MTD of VAT being introduced back in 2019.

This means no penalty points will be issued for late quarterly updates during this initial transition. This gives you and your clients valuable time to adapt without the pressure of immediate penalties.

Submissions mirror the Self Assessment “shape”, in that:

• Each trade has its own quarterly update
• Property income is one quarterly update
• Foreign property, currently included within SA106, is its own quarterly update

So, a client with:

• one trade = one quarterly update
• one trade + property = two updates
• three trades = three updates

It’s the same structure as SA103s today.

Penalty points is where there’s confusion:

• You cannot get multiple penalty points in one quarter.
• One quarter = one potential point, no matter how many submissions you miss.
• It’s the pattern of non-compliance across the year that matters.

What to do now:

• Map the “submission count” for every MTD client.
• Identify which clients will need consolidation workflows.
• Build a quarterly compliance calendar with internal cut-off dates.
• Educate clients early about the penalty model. Consistency matters more than perfection.

Joint property is the area that caused the most confusion, until HMRC introduced a long-awaited easement.

This change removes the unworkable requirement for every expense to be digitally split all year.

Getting comfortable with the new income-quarterly/expenses-year-end structure will save you huge time.

The easement (co-designed by HMRC + practitioners) is as follows. During the year, each joint owner:

• Records and submits their share of the income only

At year end they must:

• Gather all property expenses
• Allocate them between owners
• Submit the final expense update in one go

This avoids the unworkable scenario where every £3 sink strainer has to be individually split and recorded digitally by each owner.

Important limits are as follows:

• Applies ONLY to jointly owned property
• Does NOT apply to property someone owns outright
• Clients with larger portfolios should be pushed toward specialist landlord software

What to do now:

• Add an “easement flag” to your practice list.
• For 1–2 property owners: plan to use the easement.
• For multi-property landlords: recommend specialist software early.
• Educate clients clearly: “Quarterly = income only. Year-end = expenses as one combined update.”

MTD is flexible on tools, but not on process.

You can mix software, spreadsheets, and bridging, as long as digital links exist. The real challenge is avoiding a “tech long tail” where every client uses something different.

The simple rule is that you can use the following as long as digital links exist:

• Cloud accounting software
• Desktop software
• Spreadsheets
• Specialist landlord tools
• Mixed stacks (e.g., one provider for quarterly, another for year-end)

Copy-paste of totals is not allowed, as per digital linking rules.

What this means for your stack:

• You don’t have to standardise on a single system.
• You can mix bookkeeping software, bridging tools and professional tax software.
• You can test year-end functionality with multiple products during 2025.

What to do now:

• Audit every client’s current software
• Define 2–3 “MTD-approved stacks” your firm will support
• Avoid long tail complexity where every client uses something different
• Ask vendors about their MTD year-end roadmap—don’t assume it exists yet

For many bookkeepers and accountants, the year end under Making Tax Digital (MTD) is the stage that brings the most uncertainty and concern.

While the workflow itself will feel familiar to anyone used to Self Assessment, the tools and processes are evolving, so it’s natural to have questions about how everything fits together.

Understanding the intended sequence, from quarterly updates to final adjustments and client approval, will help you approach the transition with confidence and clarity.

The intended process is as follows:

1. Quarterly updates lead to cumulative totals for the year
2. Year-end adjustments could be as follows:
   • Journals
   • Capital allowances
   • Accruals/prepayments
3. Add other income (employment, pensions, dividends, etc.)
4. Client approval
5. Finalisation of the digital records to tax return submitted

There is no fifth “quarter”. Year-end is a crystallisation of the year’s data.

If you sign-up at least one client before March 2026, you get to test the year-end process in a real environment before it matters.

What to do now:

• Choose one to three pilot clients.
• Map your year-end workflow: which parts happen in bookkeeping software, which in tax software.
• Standardise your client approval process.
• Train staff so the change feels evolutionary, not revolutionary.

If there was one consistent theme in Benneyworth’s advice, it’s this: start now, in small steps.

The next 18–24 months matter more than the deadline. Your key actions should be:

• Build your MTD client population list.
• Segment and prioritise who you’ll move first.
• Fully set up your ASA and authorisations.
• Choose your software stack per client type.
• Train internal staff using pilot cases.
• Use 2025 to run at least one end-to-end rehearsal.

Early preparation is the single biggest predictor of a smooth 2026.

Leaving this until next April guarantees long HMRC queues, unforced errors, and a miserable first year.

Benneyworth’s final point was the most important one: the firms that spend time preparing now will find April 2026 manageable. The ones that wait will drown.

Here’s what that looks like in practice, if you start in 2026:

January 2026:

• Build your MTD client list (SA103 + SA105/106 only).
• Link your Agent Services Account to your old login.
• Sign-up 2–3 pilot clients while HMRC queues are quiet.
• Run at least one full end-to-end test with a real client.

February 2026:

• Train your team using the pilot cases as templates.
• Finalise your software stack and document internal workflows.
• Start staged sign-ups: digital-ready clients first, high-risk next.

March 2026:

• Scale up sign-ups before the rush hits.
• Build your quarterly compliance calendar with internal cut-offs.
• Communicate the change to clients before HMRC does.
• The deadline is April 2026. It’s rapidly approaching.

Benneyworth’s closing message cut through the noise: “MTD doesn’t overwhelm well-prepared firms—it only overwhelms late ones.”

Mandated income rules are clear once you strip away the distractions.

Partnerships and joint property aren’t as complicated when you separate HMRC’s definitions from everyday language.

Authorisation and ASA hygiene matter more than software choice. Early sign-ups give you room to fix mismatches before the rush.

Year end is familiar, but only if you’ve tested your tools.

By investing now, by building lists, segmenting clients, cleaning ASA records, and running real tests with pilot cases, you’ll enter April with confidence, clarity, and control.

MTD for Income Tax is a workflow project.

Treat it like one.

Start early. Test early. Scale calmly.

And make January count.