Setting up multiple companies to separate business interests can seem very straight forward. There are however important considerations. We explore the implications of owning too many companies.
UK GAAP Is Changing in 2026. Your Reported Profits Might Too
20 November 2025
Accounting & Compliance, Building a Business, Cloud Accounting, Selling a Business, Structuring a Business
Big changes are coming to how UK businesses report their income.
While this may seem like just a technical update for your accountant, it could affect everything from profits to borrowing capacity, or even sale price.
What’s Happening?
From January 2026, updates to UK GAAP (FRS 102) will bring UK accounting standards closer to international requirements.
These changes could directly impact how your business looks on paper — which in turn affects how lenders, investors, or potential buyers see it.
Let’s break down what’s changing and why it matters for you.
What’s Changing
Revenue recognition is shifting under the new standard: income must now be allocated to separate performance obligations within a contract.
Each portion is recognised either at a point in time or over time, depending on when control of the goods or services passes to the customer.
In practice, this means:
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Revenue will be recognised as you deliver value, not simply when a sale is made.
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Contracts that bundle products and services together may need to be broken down into separate revenue streams.
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“Included” or “free” services within a sale may now be allocated part of the overall price and recognised over time.
How this could affect reported results
Although the cash you receive from customers won’t change, the timing of revenue in your accounts might shift, potentially affecting:
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Reported profits – some businesses may show lower profit at the point of sale, with more recognised later.
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Year-on-year comparisons – results for transition years may be distorted.
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Dividends – which depend on distributable reserves.
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Borrowing and credit terms – lenders often look closely at revenue and profit trends.
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Bonus schemes or performance targets – especially those tied to revenue or margin.
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Tax planning – due to changes in the timing of profit recognition.
These impacts can be material, even when the underlying cash flow remains unchanged.
Why it matters for your business
Because revenue will be recognised differently, the profile of your profits may change — either higher or lower depending on how your contracts are structured.
Some may see more revenue in the transition year, while others may report less.
Either way, the change will have a knock-on effect on:
- Dividends – as profits may look different year-on-year
- Borrowing and credit terms – lenders often scrutinise revenue and profit figures
- Bonuses or performance targets – results may be distorted in transition years
- Tax planning – as profit timing could shift between periods
What you can do now
These changes apply to accounting periods starting on or after 1 January 2026.
If you’re planning ahead (for example, considering a sale, refinancing, investment round, or dividend strategy) now is the time to understand the impact.
Practical steps include:
- Forecasting and planning for the impact on reported profits and accounting figures
- Assessing how the new rules could affect your financial statements
- Preparing for discussions with lenders, investors, or potential buyers
Getting in touch
Our team can help you plan ahead for UK GAAP 2026 changes, model the impact, and ensure your decisions align with your business goals.
Call us today on 01634 731390 to discuss how we can help you prepare for the changes and manage the impact in line with your objectives.
Our services
If you would like to find out more about some of our services that might help you please take a look at our related pages:
Cloud Accounting & Business Software Solutions
Related Blogs
Take a look at our other blogs on the topic of the benefits of group structures
10 Business Growth Strategies to Boost Profitability and Build Long-Term Value
10 Saleability Factors for a UK Business
The content in this blog is correct as at 20th November 2025. See terms and conditions.
