Newswire January 2026

Welcome to our January Newswire.

With the end of tax season fast approaching, the 31 January deadline will signal the close of one of the busiest periods in the professional calendar.

As soon as the tax season closes, attention turns to the next key event - the Spring Forecast Statement. Chancellor Rachel Reeves continues to navigate ongoing economic and public finance challenges, while business groups and tax professionals press for change. Whatever is announced on 3 March, Mercia’s experts will be ready with a clear, digital summary of the key updates, presented in an easy-to-read format to share with your clients.

In our first Newswire of 2026, we explore the increase in Inheritance Tax thresholds for farmers and business owners, as well as the cost of Covid fraud to the UK taxpayer. See the tax section for full details. On the audit side, we look at the UK adoption of IFRS 18 and review draft regulatory strategies from the FRC and UKEB.

Whatever the year ahead brings, Mercia is here to support you with all your training, compliance, and promotional needs. We look forward to working with you throughout 2026.

AUDIT & ACCOUNTANCY

IFRS 18 adopted for use in the UK

The UK Endorsement Board (UKEB) has formally adopted IFRS 18, the new international standard governing how information is presented and disclosed across primary financial statements and accompanying notes. Replacing IAS 1, the standard aims to bring greater clarity and consistency to financial statement presentation without altering how companies recognise or measure assets, liabilities or income. For financial years beginning on or after 1 January 2027, UK entities applying UK-endorsed IFRS will now prepare their future financial statements under this updated framework.

The UKEB has also issued its formal adoption statement for IFRS 18, confirming the standard’s entry into UK GAAP for entities applying endorsed IFRS. While disclosure and presentation conventions will change, underlying accounting treatments remain unaffected. The adoption statement outlines the UKEB’s assessment process and confirms the standard’s alignment with UK public interest requirements.

FRC and UKEB publish draft Regulatory Strategy for 2026/27

The UKEB has opened consultation on its draft 2026/27 Regulatory Strategy, setting out the areas of work it intends to prioritise in the second year of its current three-year plan. The draft emphasises transparent decision‑making, clearer project prioritisation criteria and an expanded role for proactive research topics following stakeholder feedback. The strategy centres on supporting the UK economy through the application of high-quality international accounting standards.

The Financial Reporting Council has also opened consultation on its draft plan and budget for 2026–27, setting out its priorities for the second year of its current three‑year strategy and the UKEB draft budget for 2026/27 is included within the wider FRC Plan. The FRC proposals outline how the regulator aims to support UK economic growth while maintaining high standards across corporate governance, reporting, audit and actuarial work. The draft plan also commits the FRC to ensuring its activities remain proportionate and targeted in line with the government’s wider drive to reduce burdens on business.

The consultation highlights five major projects for the year ahead - including a modernised enforcement framework, an updated supervisory approach for audit, investment in new internal systems, expanded support for SMEs, and ongoing development of the Innovation & Improvement Hub to strengthen market resilience and help smaller firms build capability. The combined FRC and UKEB budget is set at £74.4 million for the year, representing a modest increase broadly in line with inflation, with headcount remaining unchanged.

The consultations will run until 6 February 2026.

IAASB issues narrow scope‑ amendments on use of external experts

The IAASB has released targeted amendments to several assurance and review standards following the IESBA’s update to its ethical requirements on the use of external experts. The revisions introduce explicit ethical expectations for auditors and assurance practitioners who rely on third-party specialists. Affected standards include ISA 620, ISRE 2400 (Revised), ISAE 3000 (Revised) and ISRS 4400 (Revised). The changes are intended to maintain alignment between the IAASB’s technical standards and the IESBA Code and to promote consistent treatment of external expert work across engagements. UK practitioners should note that these amendments will not yet apply to the UK until adopted by the FRC.

IAASB outlines approach for maintaining the ISA for LCE

The IAASB has detailed its approach for updating the International Standard on Auditing for Less Complex Entities (ISA for LCE). The update mechanism focuses on ensuring the standard remains proportionate, relevant and aligned with core concepts from the broader suite of ISAs, while avoiding unnecessary complexity for smaller or less complex audits. This structured update process will guide how future revisions are integrated. UK practitioners should note that the standard has not been adopted in the UK, though updates may impact practitioners working in international markets.

2026 edition of IFAC’s International Education Standards Handbook released

IFAC has published the 2026 edition of the International Education Standards (IES) Handbook, consolidating the full set of IES 1–8, along with the accompanying Framework and Glossary. The latest edition incorporates all recent updates to global competency and education requirements for professional accountants and is intended to support regulators, educators and professional bodies in maintaining high training standards.

FRC sets consultation windows for 2026

The FRC has announced fixed consultation windows for 2026, aiming to help stakeholders better plan for regulatory responses throughout the year. Consultations will be issued in March, June, September and December, giving firms and professional bodies improved visibility over the regulatory cycle and enabling more efficient resourcing for feedback processes.

FRC CEO outlines priorities for 2026

Richard Moriarty, CEO of the FRC, has set out the regulator’s focus areas for the coming year. The FRC will continue to support economic growth by strengthening investor confidence, reducing unnecessary burdens on business, deepening market insight, anticipating future developments and investing in the resilience and skills of the professions it oversees. Moriarty also welcomed the government’s renewed commitment to placing the FRC on a statutory footing, noting the evolution of the organisation over the last decade and its continued need to adapt.

SOLICITORS ACCOUNTS RULES

Further consultation on client money in legal services

The Solicitors Regulation Authority (SRA) has launched a further consultation on reforms to strengthen the protection of client money held by solicitors. The proposals seek to address risk areas identified in earlier reviews, including segregation of funds, handling of residual balances and enhanced transparency. Feedback will inform future updates to the Solicitors Accounts Rules.

The consultation period ends on 20 February 2026.

ACCA

ACCA publishes restructured Code of Ethics and Conduct

In July 2025, the ACCA issued its revised Code of Ethics and Conduct which was effective from 1 January 2026 and is split into three standalone documents as part of a modernisation programme. The restructure supports more efficient updates in response to changes in the IESBA Code and reduces the risk of errors or omissions. The Code continues to set out the fundamental principles and ethical expectations for ACCA members.

ICAEW

Planning for the 2025/26 reporting season

ICAEW has issued new guidance to help preparers navigate the upcoming reporting season under IFRS or FRS 102. The guide highlights key areas that frequently require judgement - including narrative reporting, impairment considerations and climate related disclosures - and outlines forthcoming regulatory changes that may affect year end reporting. It also signposts users to technical resources for deeper support.

Convertible loan notes under FRS 102 - new guidance issued

A new ICAEW Helpsheet provides practical direction on the correct accounting treatment for convertible loan notes under FRS 102. The guidance explains how the proceeds must be split between liability and equity components, how transaction costs should be allocated and how to account for settlement whether by conversion or repayment. It is aimed at supporting practitioners as the use of hybrid debt instruments continues to grow.

ETHICS

Updated PCRT requirements from 1 January 2026

Updates to the Professional Conduct in Relation to Taxation (PCRT), prepared jointly by seven professional bodies and associations whose members work in tax, are effective from 1 January 2026. The revisions align the guidance more closely with international ethical standards and introduce new material addressing engagement with third parties and handling disagreements with clients. Members working in tax are encouraged to familiarise themselves with the changes.

AML

2026: Companies House changes and AML supervision developments

ICAEW has written an article highlighting the major AML-related changes taking effect in 2026, including the transition of AML supervision for certain sectors to the FCA. Alongside this shift, Companies House reforms introduced under the Economic Crime and Corporate Transparency Act continue to be phased in. These reforms mark a significant departure from Companies House’s historically passive role, aiming to close loopholes that have enabled fraudulent company registrations.

Common risks for accountancy service providers added to AML guidance

HMRC has updated its AML guidance for accountancy service providers to include additional information on sector specific‑risks. The new material outlines typical vulnerabilities such as inadequate client due diligence, overreliance on client provided‑ information and weaknesses in monitoring ongoing business relationships. Firms are encouraged to reassess their internal controls and review staff training in light of the updated guidance.

UKFIU publishes 2025 SARs Annual Report

The UK Financial Intelligence Unit (UKFIU) has released its annual report for April 2024 to March 2025. Suspicious Activity Reports (SARs) remained steady at 867,000, while Defence Against Money Laundering (DAML) submissions also stayed broadly consistent. Notably, there was a 59% increase in cases where assets were denied following DAML requests, indicating stronger intervention and risk-mitigation activity across the regime.

DBT and Companies House release statutory guidance on people with significant control

The Department for Business and Trade (DBT) and Companies House have released draft statutory guidance on the meaning of ‘significant influence or control’ over companies in the context of the register of people with significant control. The releases also includes a supporting explanatory memorandum. This draft legislation will lie before both Houses of Parliament for a period of 40 days, during which a decision will be taken on whether to progress or not approve the draft.

SUSTAINABILITY

ISSB amends IFRS S2 and progresses natural capital standards

The ISSB has issued targeted amendments to IFRS S2, responding to feedback on challenges faced by preparers when reporting greenhouse gas‑ emissions - particularly Scope 3, Category 15 emissions for banks and insurers. The Board has also advanced work on natural capital disclosures, signalling future expansion of sustainability reporting requirements to address broader environmental impacts.

The amendments are effective for reporting periods beginning on or after 1 January 2027, with early application permitted. For IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and IFRS S2 Climate-related Disclosures (IFRS S2) to be available to UK companies, they must first be endorsed for use in the UK.

EU approves updated CSRD and CSDDD scope changes

The European Parliament has approved the Omnibus package, reducing the number of companies in scope of the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). The changes aim to streamline reporting expectations and reduce compliance burdens while retaining core sustainability transparency requirements.

TAX

Inheritance Tax reliefs threshold to rise to £2.5 million for farmers and businesses

Covid fraud cost UK taxpayer £10.9 billion

HMRC offers time to help tax bills

Scottish Budget