Upcoming lease accounting changes: What they mean for your business

From January 2026, new rules around how leases are reported in company accounts will come into effect. These changes may seem technical, but they could have real consequences for small businesses, especially when it comes to tax reliefs and audit exemptions.

Why it matters

Under the new approach, leases will need to be shown on the balance sheet. That means your reported assets could increase significantly, even though your actual cash position hasn’t changed. This shift could push some businesses over key financial thresholds, affecting eligibility for tax incentives and audit exemptions.

Key areas to watch

1. Investment schemes at risk

If you're planning to raise funds through the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS), be aware: both schemes have strict asset limits. EIS requires assets below £15 million, while SEIS is capped at just £350,000. Including leases on the balance sheet could tip you over the limit, making you ineligible and potentially losing access to vital funding.

2. EMI share options could be affected

Enterprise Management Incentives (EMI) are a popular way to reward and retain staff, but they also come with an asset threshold, currently £30 million. Once leases are included in your accounts, some businesses may no longer qualify. That could mean switching to less generous schemes, which may not offer the same benefits to your team.

3. Audit exemption thresholds

The good news is that company size thresholds for audit exemption are increasing from April 2025. However, the lease accounting changes could counteract that benefit. Businesses that were previously exempt may find themselves back in audit territory simply because their balance sheet looks larger on paper.

What you can do

If you're considering investment, employee share schemes, or planning for audit exemption, now’s the time to review your position. Acting early could help you secure funding or implement incentives before the new rules take effect.

At BlueFox Accounting, we’re here to help you navigate these changes with confidence. Whether you're a startup, a growing social enterprise, or an established business, we’ll make sure your financial strategy stays on track.