Criminals and bad actors are actively probing the smallest end of the business market and looking for whoever has the weakest security. Being small is not a protection.

The UK government’s Cyber Security Breaches Survey 2025 found that 35% of micro businesses and 42% of small businesses identified phishing attacks in the last year. Let’s look at some other stats that came out of the survey, check in on the most common issues SMEs face and then I’ll outline my simple 4-week Spring Cleaning plan.

July 19th, 2024

Do you remember seeing pictures of airports with huge banks of monitors, all of them displaying the ‘blue screen of death’ (see intro image)?

This wasn’t a cyberattack. It was a relatively insignificant ‘rapid response’ update. It’s the kind of update you’re encouraged to install as soon as it’s available. And it was from a trusted and respectable vendor, CrowdStrike.

After installing, a minor logic error meant that every time the computer tried to wake up, the error was seen as a threat, and the computer refused to load. Because the code was installed into the kernel, or operating heart, of the system, even the tools you would use to fix a problem refused to open.

Estimates say that across the world, on that one day, $5 – 10 billion was lost. Did CrowdStrike have to pay any of that back? One report says, due to the service agreement, they were liable for as low as $500 million. So virtually none of the lost money. For most small businesses, because Crowdstrike issued a fix within 24 hours, the agreement said that any losses had to be borne by the vendor.

Shooting Themselves in the Foot

What makes this so awful was that It was self-inflicted. CrowdStrike made the initial mistake in the rollout and company after company obediently accepted the update.

Often for a small business, decisions are a trade off between convenience and security. The fastest way to get things done is not always the safest. Multiple internet-connected devices, off-the-shelf products with default configurations, and a network that you might not own or don’t understand.

Shared passwords, missing multi-factor authentication (MFA), poor backups, old systems, or nobody clearly responsible for updates and recovery. The IT strategy could become, ‘We’ll sort it out later’.

‘Later’ Or ‘Too Late’?

Attacks can be direct:

A single weak password practically destroyed KNP, a transport company in Northamptonshire. They lost all their data when they couldn’t afford to pay the ransom demand. 700 people lost their jobs.

Or hit you from your supply chain:

In Easter of 2025, M&S’s online store closed for 7 weeks due to an attack. It cost them an estimated £300m in lost profits. The Co-op had a similar attack around the same time. But, the attack also affected M&S’s suppliers. The Black Farmer in Brixton supplied both of the supermarket giants. The result? The attack wasn’t aimed at them but they lost thousands of pounds of revenue.

Insider Risk

STAT 1:

Overall, 19% of businesses reported having staff training and awareness raising activities for cyber security.

In many SMEs, the real danger is normal people doing normal things. Just going about your daily work contains a number of touchpoints with the outside world that could hide a threat:

• Sending information
• Clicking on links
• Downloading something useful
• Plugging in a device
• Trusting an external request

We’re All Vulnerable

We started this blog with the CrowdStrike issue. You may not be using CrowdStrike but you are likely using Microsoft Defender, Bitdefender or relying on your Mac to keep you secure.

Anthropic (an AI industry giant) recently announced Project Glasswing. They have developed a new AI model called Mythos which is extremely good at finding security vulnerabilities in existing, widely-used software. Project Glasswing is Anthropic’s offer to provide this model to major, widely used software providers in advance to help them fix their issues. How many of the major players had issues in their software code?

Mythos Preview has already found thousands of high-severity vulnerabilities, including some in every major operating system and web browser.

Phishing Scams:

These are still the most common and effective method that bad actors use to compromise your business. They want access to your passwords, your customer data and your cash. They sell on your valuable personal data. This risks your customers and your company reputation.

AI is making scams are even more sophisticated as research about you and your business is faster and easier. Emails sound like people you do business with wrote them. Calls sound like voices you know. Urgent requests for information might include the names and contacts of your clients. Criminals who infiltrate your network can encrypt your data remotely and demand a ransom to return it to you.

USB Drives, USB Devices and Charging Cables:

Any USB device could auto play and begin to copy your data, memorise your key strokes, take screenshots of your activity and silently transmit them to the Internet. They can implant software into your computer that continues to run after you have taken the device out. Once connected successfully to one computer, they can infiltrate other devices on your network.

Downloads and Malware:

Free, useful software may be open-source (available without charge and come from a reputable source. Some websites are marketplaces for tested and virus free software. This software may have limited functionality until you buy a more advanced version.

But, if something is free, re-consider why. ‘Free’ may mean the software includes something more dangerous.

Zero to Cyber Hero: Simple Steps

STAT 2:

Only 4 out of 10 businesses have adopted more advanced controls like multi-factor authentication (MFA).

Passwords:

Don’t use the same password, or slight variations, across multiple accounts. Ban password reuse for business accounts.

Why? Now that everything is digital and your username is likely to be your email address, as soon as criminals gain your password, they can almost immediately try all your other accounts. Any similarity makes their job much easier and quicker.

Password Managers:

Long, complex passwords can be stored in an encrypted folder that is locked by one memorable Master Password.

Why? Only the Master Password is at risk. Make it easy enough to remember so that you don’t have to write it down anywhere. All your other passwords are now much safer because you don’t need to remember them. When prompted for a new password, your browser or device will give you a pop up asking you if you want it to create a password on your behalf.

Passphrases:

Make your Master Password a passphrase. Length is more important than complexity. It’s longer but still relatively easy to remember. Personally, I like to think of a cartoon or television show catchphrase e.g. It’sAnAce!HigherOrLower? That’s 24 characters long but it’s something you can remember (at least if you’re familiar with Get Your Cards Right).

Multi-Factor Authentication:

Your account prompts you for a number. An app on your phone has to be opened to provide you with a unique personal number which updates every 30 seconds. Download an authenticator app.

Hardware Security Keys:

For your most important accounts, this looks like a thumb drive. You either plug it into a USB port or, for a smart phone, place it against the NFC sensor on the back of the phone. This means your account can only be unlocked when you are physically present.

Why? These are the current gold standard. They are almost impossible to replicate or intercept. Buy two keys and set them with the same PIN in case one gets lost. No passwords are stored. Instead, a Private and a Public key are set up for each account you wish to use it for. Once set up, when you sign in, you’ll be prompted to press a button on the key, or place it against your phone, and the key will use its Private key to complete a challenge and send back the answer (‘sign the challenge’). The website will then use the previously shared Public key to verify it’s you.

Zero to Cyber Hero: Your Set Up

STAT 3:

Less than a third of businesses (31%) had set up a virtual private network for remote staff. Almost the same number (30%) had active user monitoring

Restart, Don’t Just Close the Lid:

If you’re using a Windows computer, the system memory only fully clears if you Restart your computer. Shutting it down saves the current state and then re-awakens it back to where it was. Shutting the lid is like interrupting your computer mid-flow. All your software will still be running.

This is counter-intuitive but your computer will be healthier if you Restart it more regularly. The drivers get a fresh start so there’s less chance they are corrupted. And when you Restart, your software gets a reset and any updates that have been waiting to kick into gear are all applied.

Updates:

Don’t updates just add more code to my computer’s memory and slow it down? After a big update, your system is crunching away in the background making all the changes and your device may well be slower for a few hours. However, updates are intended to remove code which is leaking RAM memory (using up memory space but not releasing it when it’s finished). Replacement code is more efficient and should get you running faster. But, the real reason to keep updating is safety. Patches fix potential weaknesses. This includes your router which can take a bit of effort to update if you’re not controlling it via an app. Connect using an Ethernet cable for security, log in to your router through your browser, and find Firmware Updates or Router Upgrades.

USB And Other Plug-in Devices:

Only use USB, thumb drives and cables that you bought yourself and you know no one else has used. Switch off Autoplay settings so that any foreign device that identifies itself as a USB drive. This prevents your computer automatically recognising and activating it.

Firewalls:

Change any default passwords. Your firewall may be set up to open a hole (or port) to allow an area or system inside your network to be accessible from the wider internet. Run an external port scan using reputable scanning software to test if there are open ports that you did not authorise.

Check your router’s firewall too. If the network isn’t yours, you may need to configure an additional firewall on whatever software that network is using. Turn off Universal Plug and Play (UpnP), disable remote admin (unless you absolutely need it) and any Wi-Fi Protected Set Up.

Staged Rollouts:

Larger companies with a range of devices and connections to their network should consider this. Give a small percentage of your workforce permission to download a new update. Allow enough time to test for any immediate issues. After, broaden the rollout to a larger number of staff and finally the whole company. If something like the CrowdStrike issue happened again, this process would limit the damage it could cause.

Back Ups:

Keep one backup separate from your day-to-day network. If you leave the place you save your back up is a separate drive, disconnect it between back ups. Otherwise, bad actors that infiltrate your network can encrypt it remotely just like all your other data.

Verifying Payments:

Finally, implement a callback rule whenever someone contacts your company regarding a payment or bank information changes. Ensure your staff know that they must disconnect the call, find a phone number they already trust and call the individual back before making payment.

Government Assistance: Cyber Essentials

The Cyber Essentials scheme is a UK government-backed programme that provides companies of all sizes with a checklist of practical steps to take to protect themselves against online threats. Good news is that, just last year, organizations with Cyber Essentials in place made 92% fewer insurance claims. The programme includes access to free cyber insurance, including a 24/7 emergency helpline. To sign up, use the free online self-assessment as well as a free 30-minute consultation to help you complete certification. From there, you can move on to IASME Cyber Assurance. Separately, you can sign up for free NCSC Early Warning notifications.

Now, time for that Spring Clean I promised:

One Month Spring Clean Plan

Week 1: Switch on MFA

Across your set up, add an MFA account using an Authenticator app to all your most important website accounts.

Week 2: Fix Passwords and Logins

Ensure staff only have access to their personal accounts and are using a Password Manager with a memorised Master Passphrase.

Week 3: Test your Back Ups

Set up a backup on a secure device and test you know how to restore that backup

Week 4: Raise Awareness

Conduct staff training to explain phishing scams and how to avoid them. Ensure all know, when they recieve a payment request, to call the company back using a number you either have on record or source yourselves.

After that, spend one hour a month:

• 15 mins checking who has access to your network
• 15 mins confirming the backup process is working
• 15 mins installing pending updates
• 15 mins reminding staff about security and checks you have put in place.

If you want to find Clarity and enjoy research-based customer insights, Clarity offers in person customer interviews for SMEs in Hackney. We offer a package of 5 half hour interviews per month and promise 5 actionable insights from each interview, providing you with authentic, independent customer feedback and a suite of marketing materials to build your reputation and word of mouth referrals.

The post Cyber Threats: Spring Cleaning For SMEs appeared first on Clarity.

Generations have been promised that a University education, a decent suit and a willing attitude would land you a job and a decent white-collar career. Lattes and cheese plants aplenty.

Although the proportion of young people with a degree is now 60%, the UK is seeing rising unemployment rates, especially among young people. Finding a job in the current job market can be endlessly dissatisfying with hundreds of applications and no response.

I work with SMEs in Hackney, East London. How is all the adoption of AI going to affect entry level jobs? And work in general? What can we learn from previous patterns of automation?

The Bad News First

In the UK, proposed mass dismissal programs rose by 5% in 2024/25, involving over 267,000 proposed redundancies. UK businesses accelerate layoffs amid AI surge and legislative uncertainty. Full adoption of generative AI could save nearly 24% of private-sector workforce time, equivalent to the output of 6 million workers. Predictions are that nearly 40% of global employment will be affected by the end of the decade. The Impact of AI on the Labour Market

White-Collar Worries?

The Centre for AI and Digital Policy (CAIDP), a US non-profit research organisation, produces its report on global AI policy every year. Here’s a summary of the CAIDP’s 2025 Index on which job roles will benefit from AI automation and which will suffer. The word clerks keeps coming up – lower-skilled, administrative roles i.e. the first step on the corporate ladder. CAIDP Index 2025 – Center for AI and Digital Policy

Tomorrow’s World – Speed, Control and Service Improvements

Imagine it’s the early noughties. The introduction of self-service tills, along with the promise of no more queuing. You would now be in control of your own shopping experience, could scan and pack your own bags at your own pace, and do so privately without feeling undue pressure. Based on the estimates at the time, what would cost the supermarket £2.50 in staff costs would now cost them 15 pence, with the implication that prices would also be affected. You’d soon be waiting less and spending more for your weekly shop.

Even the staff are about to be liberated from monotonous and repetitive tasks. They will take on more supervisory roles and had more flexible interactions with customers.

A 2003 Nielsen survey found that 52% of shoppers considered self checkout lanes to be “okay,” while 16% said they were “frustrating.” Thirty-two percent of shoppers called them “great.” Nobody likes self-checkout. Here’s why it’s everywhere | CNN Business

The Paradox of Automation – Worse All Round?

“It hasn’t delivered anything that it promises …. Stores saw this as the next frontier… If they could get the consumer to think that [self-checkout] was a preferable way to shop, then they could cut labour costs. But they’re finding that people need help doing it, or that they’ll steal stuff. They ended up realising that they’re not saving money, they’re losing money.” Christopher Andrews, Associate Professor and Chair of Sociology at Drew University, USA.

A 2025 Serve Legal study found 37% of shoppers admit to stealing at self‑checkouts, contributing to retail crime losses of £4.2bn annually. As supermarkets removed manned tills and pushed self‑checkout, more shoppers reported waits up to three minutes or more instead of no queue.

Studies of over 6,000 workers cited by The Grocer describe high stress, abuse from frustrated customers, and a sense that front‑end staffing levels are no longer sustainable. Proof that self-checkouts are causing a decline in customer service | Comment & Opinion | The Grocer

Only 10% of customers (from a 300 UK customer sample size) want more automation in store (research conducted by GetApp in February 2024) UK survey shows self-checkouts top store automation technologies

So Why Do They Still Exist?

Supermarkets typically operate on a 3% profit margin. After billions of pounds in investment in the technology, the promised savings of replacing labour with automated tills are not there. Include shoplifting, security and reputational effects and the margins are tight but, crucially, there are there. There is still a margin of profit.

As competitors have all installed the technology to seem equally interested in their customers, there’s not really any alternative so, even after a poor experience, you can’t vote with your feet and shop somewhere that hasn’t converted to self-service.

And We’ve Gotten Used To Them …

Stores today are catering to shoppers who perceive self-checkout to be faster than traditional cashiers, even though there’s little evidence to support that. But, because customers are doing the work, rather than waiting in line, the experience can feel like it’s moving more quickly. Nobody likes self-checkout. Here’s why it’s everywhere | CNN Business

According to the GetApp survey mentioned earlier, consumers are now positive about self-checkout tills:

• 69% of respondents would rate their experience with self-checkouts good to excellent.
• 73% who use self-checkouts stated they plan to continue using them in the future. 
• Over three quarters (78%) agreed that their encounters with self-checkouts have improved over the last 5 years.
• 73% claim self-checkouts add efficiency to their shopping experience.

UK survey shows self-checkouts top store automation technologies

The Pattern of Adoption

Margins vs Marginalisation

Of course, not everyone has accepted the automation of everyday life tasks. Consider how automation can instead become exclusion. In the 10 years since 2013/14, the estimated number of disabled people in the UK has increased by 4.9 million. Among 16 to 24 year olds, there are twice as many reporting as disabled, increasing from 8% to 18%. UK disability statistics: Prevalence and life experiences – House of Commons Library

Imagine you want to use a Self-Service checkout and you have a visual impairment. You have to use a touchscreen, there is no headphone jack for headphones to have a voice explain what you can see, the flat screen does not provide any tactile means to identify where you should press. Or you have a motor impairment. Cramped self-service areas. Wheelchair users cannot reach up and forwards enough, scanning requires precise movements, machines freeze if there’s a delay.

The Reality Of Automation

“I have MS and am in a wheelchair, and find it almost impossible to use the automated tills. I find it hard to juggle everything on my lap — purse, handbag, unwieldy basket, various cards — and very difficult indeed to scan and move the shopping fast enough. The first time I tried to do it, the assistant was busy and I sat there, holding everyone else up, waiting for her to help. I find these machines very upsetting because effectively they stop me from going shopping.” Linda Riordan, 60

“I have Parkinson’s disease and loathe automated tills. They are demoralising and make me feel stupid. Parkinson’s affects everyone who has it in different ways, but very often the tremor gets worse if you feel stressed or upset … I only ever use them when I’m absolutely forced to. I would rather queue halfway around the shop for a manned checkout.” Lin Merchant, 64

In 2024, several major UK and US retailers began reintroducing manned tills specifically because of feedback regarding accessibility and the “unfriendly” nature of automated lanes for vulnerable customers.

The Jevons Paradox

So, where are we on the AI automation of white-collar work?

Delving deeper into the CAIDP’s 2025 Index, we see the expectation of a gentler transition than the headlines might suggest. Enter the Jevons Paradox. This states that as a service or resource becomes more efficient, the overall demand for what it creates rises.

LED lights are more efficient. Older lights are replaced but new LED lights displays on signs or other media have been introduced. The fact they’re cheaper means there are more of them.

AI makes coding and software creation significantly cheaper and faster. What happens? More software, more tailored offers and more use cases. And this creates new specialist roles. The transition is less sudden and cliff-edge and more gradual as companies learn the skills to use AI competently and humans are employed to manage the areas it can’t handle or needs supervision for.

“It’s certainly the case right now… that the human-AI combination, the ‘cyborg,’ is superior to AI alone.” — David Oks, Essayist

Human institutions are slow to adapt and change to new technologies. I interviewed a Finance Director in a niche sector several years ago and he told me there was still a niche part of taxation where the form had to be sent by fax. They still had a working fax machine. Yes, AI is faster in its lane but it can’t comprehend the distinct personality of a company’s management structure and how Brian likes his folders labelled.

What Does This Pattern Of Adoption Predict?

Step 1.

AI is a new wave of automation. It promises to do the repetitive, resource-heavy tasks you hate for you and free you up for more satisfying work.

We will see an acceleration of adoption among the companies who can afford large-scale AI investment. Recruitment among big companies will slow or freeze. However, initial hopes of significant profit leaps will not materialise.

Case Study – Klarna’s AI Agent

At the leading edge, Klarna (the digital bank with the buy-now-pay-later instalments feature)have claimed its AI customer assistant does the work of 853 full-time agents and this saves them $60 million a year. However, overall customer service and operations costs were slightly more year-over-year ($50M vs $42M in Q3 2025). Klarna Investor Relations, “Q4 2025 Results & Strategic Update,” Feb 19, 2026. They have halved their workforce since 2022 as their revenue has doubled. Klarna Group plc – Klarna Accelerates U.S. Growth and Delivers $1bn Revenue Driven by Rapid Banking Service Adoption

However, cost savings were masking an underlying issue. A quarter of the customers with resolved issues were coming back. Their problems still existed after all. The company have now pivoted as of February 2026 to a model that re-introduces a human for more involved or high value queries.

Klarna Saved $60 Million with AI. Then It Had to Rehire the Humans.

In May 2025, in a Bloomberg interview, Klarna CEO Sebastian Siemiatkowski admitted: “As cost unfortunately seems to have been a too predominant evaluation factor when organizing this, what you end up having is lower quality … Really investing in the quality of the human support is the way of the future for us”.

Step 2.

It seems to me we’re still at early Step 2.

For most people in most work or office situations, AI certainly helps but the quality of the results is poorer than expected. Over-reliance on what AI can be trusted to do causes issues down the line.

Partly, this is because we haven’t been trained how to use it well enough and partly because the AI models aren’t reliable enough.

What Have We Learned?

The AI automation of repetitive administrative work is not a wholesale replacement of white-collar clerical workers. At least not yet. Instead, it’s a way to build efficiency into the admin work being done so that employees can achieve and produce more with less human resource.

Traditional ways of working take time to adapt and add blockers even when companies do want to automate. People don’t trust new technologies. The change will be more gradual and will probably a decade or two.

What it does mean is that new clerical roles will stall. The need for new entry level and junior roles is where the change is taking place.

However, new roles in quality assurance, AI agent management and software development will also be created.

SMEs with specialist skills can fill the gap that a drop in entry level roles will leave behind. Tailored software solutions or management services will offer businesses alternatives to developing new staff. This out-sourcing of talent and responsibility will become more attractive as the risks of AI become more apparent. But that’s a future blog.

If you want to find Clarity and enjoy research-based customer insights, Clarity offers in person customer interviews for SMEs in Hackney. We offer a package of 5 half hour interviews per month and promise 5 actionable insights from each interview, providing you with authentic, independent customer feedback and a suite of marketing materials to build your reputation and word of mouth referrals.

The post The Future of Work – Less Admin, More AI? appeared first on Clarity.

• Hospitality
• Retail
• Logistics and distribution
• Creative industries
• Social care

Or, perhaps you are using an agency to supply workers when you need them? They might be on zero hour contracts (ZHCs). As you know all too well, workload varies throughout the year e.g., Black Friday, or it’s based on winning tenders so a big win means all hands on deck for a short but accutely busy period.

From April 2027, the flexible labour market is going to change. The Employee Rights Act came into law in December 2025. This blog is the first part of a series dealing with the impacts.

I work with SMEs in Hackney. The Borough has strong hospitality and creative sectors so, when I heard about the end of ZHCs as we know them, I did some research …

Did The Government Just Ban ZHCs?

In 2015, 10 years ago, the Labour Party pledged that they would “introduce a right for those working under ZHCs to request a “standard” contract from employers after 12 weeks“. Labour re-introduced this promise in the New Deal for Working People in 2023 (see banner image above taken from ). And in 2024: “Labour will end ‘one sided’ flexibility and ensure all jobs provide a baseline level of security and predictability, banning exploitative zero hours contracts“.

Last December, the Employment Rights Act became law.

This is the first part of the Plan to Make Work Pay – a labour market shift with 70 separate measures to make finding, keeping and progressing in work in the UK more stable, predictable and productive. 28 of those measures have now made it into law. The first changes come into effect from April this year (see the box below ‘Phase One’).

In anticipation of the Bill becoming law, in November 2024 the FSB surveyed their members to find that 67% would recruit fewer staff as a result. Exactly 0% said they would consider employing more staff as a response. 24% said that they would try to automate in an effort to reduce the number of staff.

80% of British SMEs say the Employment Rights Bill is a positive step forward for staff.

In August 2025, BreatheHR asked 500 UK SMEs about their feelings. 68% of SMEs surveyed felt that there would be a positive impact on staff productivity. However, 61% felt there would be a significant increase in the time and effort it will take to manage the changes.

What Does The Act Say About ZHCs?

The Act places significant restrictions on ZHCs.

It does not “ban” ZHCs, but it gives workers who have worked a regular pattern for a set period (probably 12 weeks) the right to request a predictable working pattern. Employers can only turn down that request on very specific grounds.

Importantly, this measure includes agency workers.

“The Bill has the potential to lift 1.2 million people out of severe insecurity at work, and improve job security for nearly four million workers.” Ben Harrison, Director of the Work Foundation at Lancaster University

What Does The Government Mean By Exploitative ZHCs?

Workers complain they are “struck off” shifts for taking too many toilet breaks. Some report finding bottles which colleagues have used to pee into to prevent them having to leave their station. Staff report searches as they leave to ensure they have not stolen anything but that the time it takes, up to 15 minutes per shift, is unpaid.

Others report employers cutting shifts short if business is slow. and only paying up to the time they finish or the opposite – facing undue pressure to work last minute shifts when demand is high.

Some high profile employers like Sports Direct and JD Wetherspoons now offer guaranteed hours but a quick search online finds that there are still cases where a manager asks an employee to use their holiday during quiet times. Or, they do not work their guaranteed hours and do not get paid.

“You can think of it in terms of it being employer-driven or worker-controlled flexibility, but, for the worker, it’s really experienced as insecurity,” says Dr Alex Wood, an assistant professor in economic sociology at the University of Cambridge

How Did We Get Here? The Current Labour Market

In 2006, the Office of National Statistics suggested that fewer than 150,000 workers were on these kinds of demand-driven, “If there’s work available, we’ll give you a call,” contracts.

Then came the financial crash of 2008. The recession that followed led a lot of businesses to do everything they could to reduce their costs. They didn’t want employees on the books with little work available to keep them busy. Flexible work became more popular while, at the same time, the government was keen to keep unemployment figures low (see the box, No Work Makes Jack a Dole Boy)

As of early 2026, about 1.2 million people in Britain are reliant on casual contracts to earn a wage. There are now 508,000 young workers aged 16-24 on ZHCs. This is the highest level on record.

Statista.com

“We’ve got 15 million people living in poverty in Britain – over half of whom are in work.” Paul Nowak, Trades Union Congress (TUC), Oct 2024

What Is The Guaranteed Hours Offer (GHO)?

In 2023, 92.5% of ZHCs workers would have qualified to be offered guaranteed hours.

Employers must offer a guaranteed hours contract to workers on zero-hours or “low hours” contracts if they regularly work more than their contracted hours. Some details are not yet confirmed e.g., the definition of ‘consistently working’. Employers can, however, still provide fixed term contracts.

Rights against dismissal after 6 months:

Employers can no longer use ZHCs as a ‘de facto’ probationary period. Related to this is another part of the Act. From July 1, 2026 new employees gain full protection against unfair dismissal if they are still employed on January 1, 2027. Employers will not have the traditional two-year period to assess whether to offer a full-benefits contract.

An ‘opt-in’ for stability:

Eligible workers have the right to request or accept these guaranteed hours, but they are not obligated to do so; they may choose to remain on a ZHC if that flexibility suits their personal circumstances. When JD Wetherspoons trialled their guaranteed 70% of average hours contracts in 2016, at least two thirds took them up. Recent reports (2024/2025) indicate that 96.6% of hourly-paid staff are now on guaranteed-hour contracts.

Shift predictability:

Workers must be offered reasonable notice of shifts (probably 7 – 14 days with trade unions lobbying for at least 2 weeks), with compensation if a shift is cancelled, moved, or shortened at short notice. For ‘reasonable notice’, based on European trends and Acas recommendations, anything less than 7 days will be hard to defend.

Extension to Agency Workers:

All the new rights regarding guaranteed hours and shift notice will also apply to agency workers.

Anti-Avoidance Protections:

The Act includes provisions to prevent employers from intentionally limiting a worker’s hours during the reference period to reduce the average. The Fair Work Agency begins its work this April. They will have the power to require action from an employer, to enter premises and access files and computers, to bring tribunal action on behalf of an employee and to issue notices of payment and penalties. Employers will be able to appeal to an employment tribunal.

Phase One – April 2026

Many existing entitlements only available to employees after a period of service will become “Day One” rights:

• The right to Statutory Sick Pay (SSP) from the first day of sickness. No more Lower Earnings Limit for the receipt of sick pay.
• The right to Paternity and unpaid Parental Leave.
• The right to at least one week of Bereavement Leave. An expansion to include pregnancy loss before 24 weeks.
• The enhanced right to protection from dismissal for Maternity and up to 6 months after returning to work.

What Do SMEs Need To Do Now About Their ZHCs?

If you’re offering ZHCs, many of the administrative and compliance burdens are the same whatever the size of your business. If you do not have a dedicated HR function,you will face more risk of ‘vexatious’ claims. This is due to an expansion of employees’ rights and a shortening of full-benefit timeframes.

• You will need to track hours worked precisely and get ready to manage ‘guaranteed hour offers’.
• Start monitoring shift patterns and how regularly flexible workers receive shifts over 12 week periods to understand what your responsibilities will be.
• Give clearer and earlier notice of shifts. Begin to provide at least seven days’ notice for shifts to avoid the risk of compensation claims cancelling shifts late.
• Train managers or Team Leaders on how the new requirements affect shift allocations and shift changes.

Retail And Hospitality Focus

Trade body UK Hospitality says that 17 per cent of workers in the sector are on ZHCs – the highest proportion of any industry – and that research suggests these contracts are the desired way of working for the majority of people who are on them.

“Hospitality businesses have absolutely no more capacity to absorb costs and the Government must not increase the sector’s cost burden once again.” UK Hospitality, July 2025

In October 2026, new laws on transparency around employer tipping policies come into effect. Employers must consult to create a first draft and must review the policy every 3 years.

Add to this the changes to National Minimum Wage and business rates (see my blog on the Autumn Budget), the sector is facing a huge amount of pressure.

No Work Makes Jack A Dole Boy

For a long time, unemployment stayed at surprisingly low levels. In 2019, just before the pandemic hit, unemployment was around 3.6% of the UK’s available labour pool.

However, the low percentages were only half the story. Studies of this trend conclude that the results were a focus on getting people into any kind of work rather than matching them to quality work. The majority are helped into find low-paid, high-volume employment sectors e.g. supermarkets, social care, warehouse work.

Prospects for advancement are low – a measly 15% of low-paid workers escape this low-pay trap. Roughly a quarter of the whole labour market face a cycle of periods of finding a job followed by periods of unemployment.

Macrotrends.net

APPetite For Change: ZHCs And The Gig Economy

What are the likely results to be of this change? A greater flow of people to the gig economy. Typical examples are delivery couriers, ride-hailing drivers, parcel couriers, on-demand cleaners, carers and handymen. Some hospitality and retail shift‑workers are already booking in via apps, thereby volunteering for single shifts, jobs, or tasks.

There is still an appetite for hiring on flexible, insecure contracts. Will the raised minimum requirements for all employers encourage them not to employ at all? Instead, could they move to gig platforms instead?

“The side effects could be, potentially, that instead of having lots of people working fewer hours, you’ll have fewer people working more hours. That puts a bigger burden back on the state if more people are unemployed.” Simon Fennell, Shoosmiths

Will smaller teams work permanent contracts?

Will employers expect work to be completed in unpaid overtime?

Unspoken pressure from employers not to accept GHOs?

One thing everyone seems to agree on – we are going to see businesses restrict their recruitment and, where possible, reduce their headcount. Whether the security that these new contracts gives leads to productivity, growth and more jobs to be filled remains to be seen.

If you want to find Clarity and enjoy research-based customer insights, Clarity offers in person customer interviews for SMEs in Hackney. We offer a package of 5 half hour interviews per month and promise 5 actionable insights from each interview, providing you with authentic, independent customer feedback and a suite of marketing materials to build your reputation and word of mouth referrals.

The post Have the Government Just Banned Zero-Hour Contracts? appeared first on Clarity.

Can SMEs really win big government contracts? Here’s how …

SMEs make up 99% of all UK businesses and employ 16 million people but they win a tiny sliver of a share of government contracts. Though they may have a small team, they have potentially game-changing local insight. Now, public contracts are becoming more available. SMEs and VCSEs have a chance to get more involved in higher profile, more consistent, well-paid work. This is where Supply Connect comes in.

Have you heard of Supply Connect?

It’s unlikely that you have but, according to the numbers, you’ll be interested. Enterprise Nation research showed that 51% of SMEs surveyed wanted to win government contracts, 40% need support to do so but 23% had never heard of any such training being available. Supply Connect is the key to unlock all this SME potential.

I noticed the launch last October. As a researcher who’s interviewed hundreds of small businesses and partners with them to help them grow, I am interested to see what’s happening and how it’s all meant to work. Here’s what I found out …

The Tier 1 Club

Government contracts are, by definition, large and their performance scrutinised. This leads to more rules and greater answerability. Perhaps naturally, then, contracts are often awarded to large, trusted partners. As an example, prison contracts worth £1 – 4 billion are open to a shortlist of just 6 suppliers. These major players are the Tier-1s. These big projects often require local knowledge and insight so the Tier-1 organisation breaks them up and offers them to its supply chain. These subcontractors are the Tier-2s.

What about SMEs who aren’t in the current supply chain?

Turns out there hasn’t been much room for them. Lynne Copp, and her SME The Worklife Company won a Challenge Fund contract for work life balance, leading to 5 years of consistent, national growth in the early 2000s, “We had a brilliant contract with the government, the Challenge Fund for worklife balance managed by Tier-1 PwC. We worked as a Tier-2 supplier for about five years… They had about 40 SME organisations approved on the Challenge Fund supplier framework.”

Even with such a positive experience, more recently she has found that there are higher barriers and less transparency in the process. Who is the appointed Tier-1 supplier? Who is able to apply for the Tier-2 contracts? How? Her business model had to adapt as access narrowed. She said, “It’s usually word of mouth. The Tier-1 suppliers for the NHS, I can’t get on because I’m a one-man band. They want the big six and that’s it.”

Opening the Door

After the UK left the European Union, there was a chance to revisit how the government awarded public contracts. New rules were needed and thus the Procurement Act 2023 came into being.

It made a slight but significant change to the wording of the previous regulations. Whereas before the contract would be awarded to the “most economically advantageous”, now it would go to the “most advantageous” tender. Notice the loss of ‘economically’.

From 2025, public contracts should be awarded where it would create the most value and not based on who would save the most money

What was the intention behind the change? A broader definition of what public contracts were trying to achieve. From 2025, contracts are to be awarded where it would create the most value and not based on who would save the most money. 10% of the weighting from contract tender scores is now linked directly with Social Value.

What is included in Social Value?

Any business who wanted to win public contracts now have to prove they are sufficiently skilled, resourced, insured, digitally secure, fiscally robust and everything in between for the part of the contract they were tendering for. Contractors will write tenders but not solely with Tier-1 national company capacities in mind. This was to be the end of requirements that most SMEs couldn’t dream of meeting e.g. proofs of hundreds of thousands of pounds in cash flow or insurance.

In addition, there is a new focus placed on how interested businesses are contributing to their communities, fostering initiatives for community integration and considerate of the environment. Think local sourcing, local employment, local apprenticeships and training.

Supply Connect spells the end of tendering requirements that most SMEs couldn’t dream of meeting

The Social Value Model

Here’s the Social Value Model as published by the Cabinet Office and introduced in February 2025:

For all but the biggest contracts, Central Government now have to choose at least one of the above outcomes and ensure a question related to that outcome is included in the tender.

Laying the Supply Connect Red Carpet

To achieve this, there are organisations who will train and prepare engaged SMEs. From October 2025, the Supply Connect programme would offer tailored training, Meet the Buyer events, and, once approved, access to digital supplier platforms.

Who’s running Supply Connect and how?

Enterprise Nation are leading the programme, developing the digital supplier hub and resources, and advocating for SME involvement.

Newable provides specialist support, including tailored business advice and mentoring, organising and running the Meet the Buyer events.

MSDUK, WEConnect International, and OutBritain are also partnering to support inclusion and diversity.

Funding comes from the UK Government’s £2 billion construction and housing fund as well as £1.2 million of JP Morgan Chase’s £40 million commitment to UK business growth.

Oversight will be the responsibility of the new Cabinet Office body, the Procurement Review Unit (PRU). Within that, the Public Procurement Review Service (PPRS) will deal with complaints, the Procurement Compliance Service (PCS) conducts formal investigations and will offer recommendations and remedies, and the Debarment Review Service (DRS) will maintain a list of excluded organisations. The PPRS replaces the previous Mystery Shopper service for complaints.

What evidence is there that this partnership will work?

• Enterprise Nation and Newable have been working together already. Commenting on Newable’s successful partnership with Enterprise Nation to offer the Help to Grow: Management (HtGM) course and associated mentoring, Chris Manson, CEO of Newable, said: “Helping small businesses to grow is at the core of Newable’s mission.” “An independent evaluation by Ipsos and the Institute of Employment Studies found that 91% of participants would recommend Help to Grow: Management to other business leaders.”  91% of Help to Grow: Management completers recommend the course
• Andrei Ceteras, Managing Director of Surrey-based care provider MedUKCare, completed the course at Kingston Business School. He said ‘I owe a lot of my company’s success to the Help to Grow: Management Course. I managed to double my workforce from 5 to 10 people and increase my revenue by 250% in 1 year.’ 

Getting Your Name on the List

Rather than having to fill out an exhaustive and inscrutably worded questionnaire, SMEs will need to make the grade and meet the Supply Connect Standard. What does this involve?

Before tendering for any contracts, SMEs will need to prove they are already Day One ready.

Step One

Register to be a member of Enterprise Nation. Register for Supply Connect.

Step Two

Fill out your business profile. These are general questions about the size and nature of your business.

Step Three

The “Digital Readiness” Audit. Entry begins with a diagnostic questionnaire as well as submitting your business documentation. This will ask you what support or training you think you might need as well as your confidence level when it comes to bidding.

Which documents need to be provided?

• Registered Business or Charity (Not-for-profit) Status. Note that self-employed individuals are able to apply but registered organisations are preferred.
• Organisational Policies:
  • Safeguarding
  • Equality and Diversity
  • Data Protection
  • Health and Safety
• Certifications: Any ISO standards; ESG (Environmental, Social, Governance) certification. Note you may require a cybersecurity certificate.
• Insurance: All relevant policies.
• Financial Health: Including details of cash flow capacity.
• Capability Statement: A concise summary of the organisation’s services, client history, and evidence of previous results.

Step Four

Verification. Your profile is scored. You receive A personalised training plan to help you hit the sufficient ‘Contract-Ready’ standard. You can begin to meet with advisors, work with mentors and attend events in line with the recommendations.

Once you have received confirmation that you qualify, you can move on to Step Five.

Step Five

“Meet the Buyer” Matching. You’ll receive alerts of opportunities you can bid for. The “Supply Connect Hub” matches your profile with specific buyers. If you get a match, you can choose whether to express interest. Win the bid and you can move to Step Six. If your bid fails, you should receive feedback to explain what changes you may need to make to qualify.

At this point, there are two different kinds of contracts:

• Frameworks are one-time contracts offered to a fixed roster of suppliers for the duration, which is typically around 4 years (see Step Six). The Adult Social Care (Supported Living & Residential Care) contract is an example.  
• Dynamic Purchasing Systems (DPS) use afully electronic system for common goods and services. New suppliers who meet the selection criteria can join a DPS at any point during its life. An example is the London Borough of Hackney’s Temporary Accommodation DPS , valued at £198 million.

Step Six

Framework Induction. A 6-to-12 month window to introduce you to the requirements of the framework, including its pre-agreed pricing terms, KPIs, and conditions. These Framework agreements set out the pre-approved terms for all future mini-contracts (“call-offs” or “requirements”) for individual purchases of products or services.

For DPS, you may need to complete a final electronic sign-off to accept the official terms and conditions.

Spotlighted Industries

Although Supply Connect is intended for all public services, there is an initial focus on 3 ‘Pathfinder’ sectors as a test of concept. Interested SMEs will be helped to become contract ready for the following contracts.

Pathfinder Sectors

Public Contract Portals

FAQs

What is Supply Connect?

Supply Connect gives Hackney SMEs a structured, low‑cost route to become “Contract Ready” for public sector work and be actively matched to real contract opportunities, rather than being left to decode complex portals alone.

What does meeting the Supply Connect Standard bring me?

Tier‑1s and public buyers can now find and invite qualifying SMEs to work with them. Tenders include a minimum 10% weighting for social value (favouring local employment, community impact and greener practices that many Hackney SMEs already deliver but have never formalised).

What help is available?

Enterprise Nation and Newable are delivering tailored diagnostics, documentation checks and mentoring via the Digital Readiness audit and “Meet the Buyer” events. Supply Connect helps SMEs prepare standard policies, insurance, financials and capability statements once, then reuse them, so even small teams can be more competitive.

Opportunity knocking?

For your Hackney SME, there is opportunity here. Many local SMEs and VSCEs are already engaging with communities, addressing domestic issues, using locally supplied food, and reducing waste. Many of these skills, if explained and evidenced well, could mean that public contracts are available – contracts that are well-paid and have a long-term lifespan of at least 4 years. This gives SME owners stability and potentially some breathing room from sales activity to focus on expanding your organisation’s skills. Registration is free, as are the training opportunities and assistance with paperwork. Instead of repeatedly completing the same information on smaller, independent bids, Supply Connect puts your name on the list. It’s a means of pre-qualifying your business for future opportunity.

FAQs

What is Supply Connect?

Supply Connect gives Hackney SMEs a structured, low‑cost route to become “Contract Ready” for public sector work and be actively matched to real contract opportunities, rather than being left to decode complex portals alone.

What does meeting the Supply Connect Standard bring me?

Tier‑1s and public buyers can now find and invite qualifying SMEs to work with them. Tenders include a minimum 10% weighting for social value (favouring local employment, community impact and greener practices that many Hackney SMEs already deliver but have never formalised).

What help is available?

Enterprise Nation and Newable are delivering tailored diagnostics, documentation checks and mentoring via the Digital Readiness audit and “Meet the Buyer” events. Supply Connect helps SMEs prepare standard policies, insurance, financials and capability statements once, then reuse them, so even small teams can be more competitive.

Opportunity knocking?

For your Hackney SME, there is opportunity here. Many local SMEs and VSCEs are already engaging with communities, addressing domestic issues, using locally supplied food, and reducing waste. Many of these skills, if explained and evidenced well, could mean that public contracts are available – contracts that are well-paid and have a long-term lifespan of at least 4 years. This gives SME owners stability and potentially some breathing room from sales activity to focus on expanding your organisation’s skills. Registration is free, as are the training opportunities and assistance with paperwork. Instead of repeatedly completing the same information on smaller, independent bids, Supply Connect puts your name on the list. It’s a means of pre-qualifying your business for future opportunity.

If you want to Find Clarity and enjoy research-based customer insights, Clarity offers in person customer interviews for SMEs in Hackney. We offer a package of 5 half hour interviews per month and promise 5 actionable insights from each interview, providing you with authentic, independent customer feedback and a suite of marketing materials to build your reputation and word of mouth referrals.

The post Supply Connect: Getting Your Name On The List appeared first on Clarity.

I’m a small business owner who wants to leverage AI myself, so what’s the deal? Are we all going to be replaced … or enhanced? Let’s find out.

How Do AIs Search For Answers?

If you’ve been keeping up with the tech news, you might want to skip this paragraph, but a lot of business owners are still at the starting line trying to understand what AI can do. Artificial intelligence is a system that does things in a human-like way. We’ve all used Google search and learned to change full sentences into keywords to get the information we were looking for.

Then Chat-GPT came along and we could just start to type in (or say) a question and, a few seconds later, the answer wasn’t a list of new Internetty links to choose from, but a paragraph of human-sounding text explaining what the answer was. Jaw successfully dropped.

In only a couple of years, we’ve learned that a lot of those answers have been plucked out with some, but not much discernment, from the largest library in the world, the World Wide Web. How do they sound so human? It’s all due to LLMs (that’s Large Language Models) – a huge memory bank of millions of real sentences, all broken down into pieces and their probabilities of occurrence all notched into percentages.

Now, when you ask, ‘What is the capital of France?’ – just imagine all the books, films, blogs, poems etc. etc. which have referenced the answer … Paris. So the words ‘France’, ‘Paris’ and ‘capital’ have a super-strong percentage chance of occuring together. The LLM looks at that very high percentage and tells you, very confidently, and with increasingly more life-like phrasing, what the result of it’s comparisons is. Adoption of this amazing new technology has been rapid and, perhaps because it sounds so human, many people have started asking AI models for advice – 53% of UK small business owners are using Chat-GPT and its friends to help them guide business decisions. [1]

The Rise of Agentic AI

We are now moving from AI-search to AI-Agents, who perform a series of instructions for you based on the training you’ve given them. In some cases, these AI Agents can even make decisions on your behalf. Albania has recently appointed an AI government minister to handle public government contracts and has executive decision-making powers. [2]. On the horizon? AI Agents built into your Internet browser that can view your history and all your personal files, decide on your preferences, and buy or organise things it knows you like. And beyond that? The Agentic Web – Agents working together without any human involvement, comparing the data they have collected and coming to mutually favourable decisions [3].

So, should a small-medium size business be investing in this future? I mean, beyond the casual use of Chat-GPT, Co-Pilot or (for the dabblers) Claude. Is AI the game changer?

One Statistic That Speaks Volumes

Are you ready for the statistic MIT came up with in July this year to headline their study of Generative AI adoption’s Executive Summary [1]?

Despite $30–40 billion in enterprise investment into GenAI, this report uncovers a surprising result in that 95% of organizations are getting zero return.

This shocked me. That is a lot of money which, at least in the opinion of the researchers, had not led to the expected revenues that AI was meant to unlock.

So, some caution is in order here. If we think about it … not everyone needs a power drill. Now, if you need a drill, then you should absolutely invest in a power drill. AI is a powerful tool for repetitive, easily-supervised, non-risk business tasks. It is very much taking away junior roles in software-driven business sectors and, unemployment and related mental illness consequences aside, it makes sense that the kind of jobs a junior staffer would be given are the kind of jobs AI feeds off.

AI adoption and the J-Curve

Initial adoption of AI business solutions leads to a shift in the way a business works and consequent re-training, legacy program integration and all the related costs of building new efficiencies in. This means that businesses adopting AI in a big way see an initial drop in profits. The numbers show businesses taking 18 months or more to start seeing any financial benefits (between 2017 and 2021). [4] However, by the end of the 4 year period, early adopters had begun to outperform their non-adopting competition.

“AI isn’t plug-and-play,” saysKristina McElheran, one of the authors of a paper on the rise of AI in the US, “It requires systemic change, and that process introduces friction, particularly for established firms.” 

Sources: AI generated. Sector comparisons are based on 1) how widely different industries are using AI and 2) how advanced they are digitally, from official U.S. business surveys (BTOS and ABS) and insights from multiple other studies (census.gov, federalreserve.gov, apps.bea.gov).

Larger and/or more digitally mature businesses were better placed to get the advantage earlier. Complementary business functions needed parallel investment, such as data infrastructure, training and designs of workflows to accommodate the change. Without them, bottlenecks can appear or AI fails to deliver at the expected rates. Older organisations with legacy systems and very established routines also took longer to see the benefits. So, the more tech-adjusted you already are, the more nimble you are, the more likely AI can boost your company’s activity.

“AI isn’t just plug and play”

One corporate lawyer from a medium-sized firm noted that a $20/month ChatGPT subscription consistently produced better outputs than her firm’s $50,000 specialised tool. She noted:

“Our purchased AI tool provided rigid summaries with limited customization options. With ChatGPT, I can guide the conversation and iterate until I get exactly what I need. The fundamental quality difference is noticeable, ChatGPT consistently produces better outputs, even though our vendor claims to use the same underlying technology.” [3]

Security

If you are planning to invest in building your own AI solution, the model will need constant updates and maintenance, and the responsibility for security is all on your shoulders. The less human supervision a system has, especially if Agentic AI is used, the integral design of an LLM means that, without intervention, it sees your initial instructions and any other data it comes across with equal value.

Here’s part of a discussion about how LLMs work. Note the italics added by me:

“The difference is that LLMs are fundamentally insecure in this way as part of their basic design … this programming language deliberately executes values stored in the String type sometimes, depending on what’s inside it. And we don’t really understand how it makes that choice, but we do know that String values that ask the language to execute them are more likely to be executed. And this is fundamental to the language, as the only way to make any code execute is to put it into a String and hope the language chooses to run it.” [5]

In this grave new world, bad actors could plant secret commands (string type = text instructions) inside otherwise inoffensive website content. Your AI Agent crawls that data and asks you if you want to take a benign action e.g. ‘Summarise findings’, and then actions it.

What Can AI Do For SMEs?

Consider what tasks your business would like to enhance and the risk-reward profile:

• Could an off-the-shelf tool handle this for you? (see below for examples)
• Are you looking to combine multiple systems into more automated workflows?
• Is it something currently controlled by a human but with large financial or compliance risks attached?

If the answer is yes, seek the advice of an AI architect or consultant who can check how viable an AI system is. Or, join an Accelerator programme for SMEs, where expertise is more readily available (see below for examples).

Off-the-shelf solutions

UK AI Innovation Opportunities

Keep an Eye on the Dials

It goes without saying, but monitor your ROI and KPIs to ensure you know what benefits you’re getting. Appoint a champion who will explain the reasons and benefits to staff, of whom many are probably skeptical of AI more generally. On the opposite side of the aisle, some may be overconfident in their trust of automated systems. A pilot project involving a few voices from across the business might help with persuasion. Consider data risks especially and set out what the response should be in case data is compromised. Then, set the example and try to understand the technology yourself so that you can set a leading example in making use of it, and be among the first to notice any issues.

[1] What Does Worldpay Survey Say About UK SMEs’ Attitude to AI? | Business Chief North America

[2] Albania appoints world’s first AI-made minister – POLITICO

[3] State_of_AI_in_Business_2025_Report MIT NANDA Aditya Challapally Chris Pease Ramesh Raskar Pradyumna Chari July 2025

[4] The Rise of Industrial AI in America: Microfoundations of the Productivity J-Curve(s)

[5] Comet AI browser can get prompt injected from any site, drain your bank account | Hacker News

The post Before You Invest in AI: What Every SME Owner Should Know appeared first on Clarity.

MTD is, if you haven’t heard by now, Making Tax Digital, an initiative from HMRC to ensure almost live tax reporting and, eventually, tax payment. The project has been gradually implemented over the last 6 years and since April this year all businesses that charge VAT should already be joined with HMRC at the computer-chip. (Employers have been using RTI (Real Time Information) to report PAYE since 2013 but that is a whole different system.)

The next stage, over the next 3 years, is to have small businesses reporting their income tax and property income every 3 months. You read that right. Every 3 months. No more sweaty Januarys emptying glove boxes, back pockets and receipt tins. Instead, small businesses will soon be in a constant reporting cycle of 5 tax returns every year (four quarterly updates and an annual final declaration).

So, get yourself a napkin and work out your expected turnover for your current financial year i.e. your gross income, before accounting for any expenses or tax reliefs. This includes any property income (including furnished holiday lets) you may receive as a landlord. It does not include any PAYE income you receive from other employment.

Then check the timeline for adoption…

If the number you’re staring it is over £50,000, you will need to adopt everything described below starting from April next year (7 months away). If you are near the threshold and there’s a chance you might tip over £50,000 during the 2024-5 tax year, you’ll also need to get prepared for April next year.

However, even if you can’t imagine your turnover hitting £20,000 soon, the advice from the business community is to start getting ready now. Don’t underestimate how much your behaviour will need to change to make this a seamless transition. Even if you’ve been running a small business for years, waiting until you have to change may well end up being more expensive and a lot more inconvenient.

One addition to this – note that there have already been delays and there is a chance there will be further postponements to the above published timeline.

Let’s be clear …

This is not just a tax change. How much tax you pay is a completely separate question. This is a wholesale change in how you report and how often you will need to report.

Businesses can no longer afford to leave their tax reporting till the end of the year to sort everything out

If you aren’t paying VAT already, you will need to change the set up of your current software or, you’ve guessed it, buy completely new software. There are specific rules to prevent any manual re-entry after you first entered your initial accounting figures. The idea here is that accidental copying errors will be totally prevented. The concern is us small business owners don’t set things up properly in the first place.

The requirements for digital record-keeping and having software that will talk to HMRC applies equally to all businesses, despite their employee headcount or when they start actually reporting. This means the costs for this specific Income Tax and Self Employed reporting are effectively the same. However, there are also some benefits which smaller businesses are likely to get comparatively more of. More about that soon.

What does ITSA MTD reporting involve?

Keeping clearer digital records. Especially if you have mixed income streams, all income and expenses must be broken down by type of income. You may keep this information on a spreadsheet but you must use bridging software to send the data to HMRC without any manual re-entry of the figures.

Quarterly updates. Every quarter of the financial year (you can request to use your own financial year), by the 7^th of the first month of the new quarter, the previous quarter must be reported.

Verify that the digital link has worked and the figures have been sent accurately:

End of year final declaration. The final declaration will be pre-populated with the income and expenses data already submitted through the quarterly updates i.e. all sole trader and landlord data.

This end of year declaration replaces the Self Assessment return.

Note: Gross sole trading and rental income may only be a part of the total taxable income reported at the end of the financial year. It may be easy to overlook some income sources for this end of year return and so, although not included with the quarterly updates, complete records must be kept throughout the year. You are expected to keep digital records of all income and expenses. This does not mean a photograph or PDF but at the very least the amount, category, and date of each. Digital records can either be held in accounting software or on spreadsheets. Keeping paper receipts for bookkeeping may still be best practice but they are not required by MTD.

For VAT, records must include the time of supply (tax point), debit/credit notes, imports/exports, VAT-exempt items, and expenses that do not incur VAT.

For ITSA, records must detail self-employment income, property income, dividend income, savings interest, and allowable business costs, supported by valid evidence such as sales invoices, business bank statements, tenancy agreements, and dividend vouchers.

The payment deadlines for income tax haven’t changed from the current 31 January and 31 July each year.

What if I make a mistake?

Between quarterly updates, it might come to light that an accounting error has been made. You can correct this on the next quarterly update. But note that the final declaration pre-populates from your Q4 update so accuracy on the final update of the year is crucial.

If you are late with your submission, HMRC will award you penalty points. All penalty points expire after 24 months of sound compliance unless HMRC grant an exception.

So, what do I have to do?

Check if you are exempt.

Exemptions are automatically applied if you are a:

Exemptions can be claimed and must be approved by HMRC if you are digitally excluded due to:

If you start trading as a sole trader or acting as a landlord after 6 April 2026, you can submit a Self Assessment tax return first before you transition to MTD, or you can choose to register straight away.

If you’re exempt, it may be worth your while to know a bit more about it in case your exemption state changes.

If you’re not exempt, or you’re not sure, read Part 2 where I explain the costs of compliance, software choices,

The post My MTD Survival Guide: What Is Changing (Part 1) appeared first on Clarity.