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There has been big news in the business accounting world. The Government is bringing in Companies House compliance changes that will affect a number of businesses. What are they, and what will you have to do? Don’t worry, we’re on hand to answer all of your questions so that you can remain compliant with all rules and regulations. As the accountants so many businesses rely on, we’re here to talk you through all of the Companies House changes 2028 has in store. Ready? Let’s get into it!

What changes are coming to Companies House in 2028?

The UK Government has just announced changes to what information businesses must report when filing their annual accounts with Companies House, and how they need to do it. These reforms were brought in to ensure that the data on the companies register is accurate, reliable and presented with the highest level of transparency. It will also help to inform business decisions, ensure our practices are modernised and in line with other countries, and also help to tackle economic crime.

The Government did originally plan to introduce these Companies House accounts filing changes in 2027, but they were pushed to 2028 in order to give businesses more time to prepare. So you now have a full tax year and just over eight months to prepare. This is great news for any business with concerns about how they are going to deal with the changes, but it also gives you no excuse not to be ready when the time comes!

Let’s find out a bit more about what those changes are and what you need to do.

Key Changes at a Glance

Who Will Be Affected by the 2028 Companies House Changes?

The new filing requirements will affect the vast majority of UK limited companies that file annual accounts with Companies House. Whether you’re a small business, micro-entity or larger company, it’s important to understand how the changes could affect your reporting obligations.

If you currently rely on paper filing or prepare your accounts manually, you’ll need to move to software that supports digital filing in the required iXBRL format. Businesses already using cloud accounting software such as Xero are likely to find the transition much easier.

If you’re unsure which rules apply to your business, speaking to an accountant well before 2028 can help ensure you’re fully prepared.

Why Are These Changes Being Introduced?

The reforms form part of the Economic Crime and Corporate Transparency Act, which aims to improve the accuracy and reliability of information held at Companies House.

The objectives include:

• Improving trust in the Companies House register
• Reducing fraud and economic crime
• Making company information more reliable for lenders, suppliers and investors
• Modernising the UK’s company filing system
• Increasing transparency while giving businesses greater control over commercially sensitive information

Although the new requirements may seem like extra administration, they are designed to create a more secure and trustworthy business environment.

Will small companies need to file profit and loss accounts?

Yes, you will. Small companies, along with micro-entities, will be required to file their profit and loss accounts with Companies House. However, you will have the choice to opt out of that information appearing on the public register. This is in response to concerns from the business and investment community around the privacy and commercial risks that come with sharing this information.

Do I need accounting software to file accounts with Companies House?

Yes, you will need to use accounting software to file your accounts with Companies House. Registered companies will need to file accounts in Inline eXtensible Business Reporting Language (iXBRL) format by using commercial software. The Government does have a list of software providers on GOV.UK to help companies find a suitable software package, so we recommend looking at those to see which one best suits your needs.

Here at Outsource Financial Solutions, we use Xero accounting software. Fully compliant with all current regulations, along with the upcoming changes, it’s seen us achieve great success with our clients and their accounting needs.

How Can Businesses Prepare Before 2028?

While the changes don’t come into force until 2028, there are several practical steps you can take now.

Review Your Accounting Software

If you’re still using spreadsheets or desktop software, now is a good time to move to cloud accounting software that supports digital filing.

Keep Better Financial Records

Accurate bookkeeping throughout the year makes preparing annual accounts significantly easier and reduces the risk of errors.

Speak to Your Accountant Early

Rather than waiting until your next year-end, discuss the upcoming changes with your accountant. They’ll be able to review your current processes and recommend any improvements before the new rules become mandatory.

Train Staff

If members of your team are responsible for bookkeeping or submitting information, make sure they understand the new filing requirements.

How can an accountant help me prepare for the 2028 Companies House reforms?

Having an accountant that you can trust makes any regulatory changes so much easier to deal with. We will begin by looking at your current operations and filing methods and seeing if anything you do needs to change when the new rules come in. Then we can ensure that your accounts are filed correctly using the right software, and that your wishes regarding any of this being made public are followed at all times.

How OFS Can Help

Regulatory changes can feel overwhelming, especially if you’re already focused on running your business.

At Outsource Financial Solutions, we help businesses stay compliant while making accounting simpler. We’ll review your current accounting systems, ensure you’re ready for the Companies House reforms and manage your accounts using fully compliant cloud accounting software.

Whether you’re changing software, preparing your first digital filing or simply want reassurance that everything is being done correctly, our experienced team is here to help.

Frequently Asked Questions

Will Companies House changes affect sole traders?

No. These reforms apply to companies registered with Companies House. Sole traders are not required to file annual accounts with Companies House, although they still have tax obligations with HMRC.

Will I need to change my accounting software?

Not necessarily. If your current software supports digital filing in iXBRL format and meets Companies House requirements, you may be able to continue using it. If not, you’ll need to switch before the changes take effect.

What is iXBRL?

Inline eXtensible Business Reporting Language (iXBRL) is a digital format used for filing financial information electronically. It allows Companies House and HMRC to process accounts more accurately and efficiently.

When do the new Companies House rules start?

The Government has confirmed that these changes are expected to come into effect during 2028, giving businesses additional time to prepare.

Can my accountant file my accounts for me?

Yes. Most accountants can prepare and submit your annual accounts on your behalf using compliant software, ensuring you meet all filing requirements and deadlines.

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What You Will Learn From This Guide

• Construction accounting is fundamentally different to standard business accounting, with its own rules, compliance requirements and financial tools.
• CIS (Construction Industry Scheme) governs how contractors pay subcontractors. Getting it wrong attracts HMRC penalties.
• Job costing and WIP accounting are essential for understanding project-level profitability in real time, not just at year-end.
• Payroll in construction is more complex than most sectors, with mixed workforces, CIS deductions and employment status risks.

The right accounting software can transform how well you manage cash flow, compliance and project visibility.

Why Construction Accounting Needs Its Own Rulebook

Most businesses can get by with standard accounting software and a generalist accountant. Construction businesses cannot.

The sector has its own tax scheme, its own revenue recognition rules, its own payroll complexity, and its own cash flow pressures. A single project can span multiple financial years, involve dozens of subcontractors with different CIS statuses, generate retention amounts that sit on the books for months, and require stage-payment invoicing that bears no simple relationship to when work was actually done.

Understanding how construction accounting works, and why it differs so significantly from accounting in other industries, is one of the most important things a construction business owner or director can do. It is not just about compliance; it is about having the financial visibility to run projects profitably and make confident decisions.

What is Construction Accounting?

Construction accounting is a specialised branch of financial management built around the way construction projects actually work. Rather than treating the business as a single entity with a single pool of income and expenditure, construction accounting tracks finances at the level of individual contracts and projects.

This is necessary because construction revenue and costs rarely align with standard accounting periods. A building project tendered in January may not begin until April, run through to the following March, and generate retention income that is not received until the year after that. Standard accounting methods would badly misrepresent the financial position at any given point.

What Makes Construction Accounting Different?

CIS Explained: The Construction Industry Scheme

The Construction Industry Scheme (CIS) is a tax mechanism specific to the UK construction industry. Under CIS, contractors must deduct money from payments made to subcontractors and pass it directly to HMRC. These deductions are treated as advance payments towards the subcontractor’s Income Tax and National Insurance liability.

It sounds straightforward, but the detail is where most businesses run into difficulty.

CIS Deduction Rates at a Glance

Applying the wrong deduction rate is one of the most common CIS mistakes contractors make, often because a subcontractor has not been verified before work begins, or because their registration status has changed since they were last used. The financial consequences can be significant. HMRC does not treat incorrect deductions as an administrative error; they treat it as a contractor liability, meaning you are responsible for making up any shortfall, plus interest.

If you are unsure whether your deductions have been applied correctly, or you have received a query from HMRC about your CIS returns, it is important to act quickly.

Who Does CIS Apply To?

CIS applies to most construction work carried out in the UK, covering a wide range of activities including groundworks, structural work, interior fit-out, roofing, plumbing, electrical and decorating. Many businesses operate as both a contractor (engaging subcontractors) and a subcontractor (working for a main contractor), meaning they have responsibilities on both sides of the scheme.

To learn more in depth about CIS, read our other articles

Job Costing: Knowing Exactly Where Every Pound Goes

Job costing is the process of recording and allocating every cost, labour, materials, plant hire, subcontractor payments and overheads, against a specific project. It gives you a granular, project-level view of profitability that simply cannot be achieved by looking at business finances as a whole.

In an industry where net profit margins typically sit between 2% and 5%, job costing is not a nice-to-have. It is the mechanism by which profitable construction businesses stay profitable.

What Should Job Costing Track?

Beyond protecting individual project margins, accurate job costing generates a library of real historical data that makes future tenders more accurate, reduces the risk of underpricing or overpricing, and gives you evidence for commercial conversations with clients about variations and additional costs.

WIP Accounting: Measuring Progress, Not Just Invoices

Work in Progress (WIP) accounting measures how far through a project you actually are and compares that against how much of the budget has been spent. It is the financial mechanism that allows construction businesses to report accurately on long-duration projects across multiple accounting periods.

Without WIP accounting, your reported financial position can be badly distorted. Heavy invoicing in one period can make the business look highly profitable when costs are yet to land. WIP adjusts for this, giving a true picture of where each project stands financially at any point in time.

WIP Percentage Completion: Example

WIP accounting is also critical for businesses that report to shareholders, lenders or investors. Lenders in particular will scrutinise WIP positions when assessing development finance applications or reviewing covenant compliance, making accurate WIP reporting a commercial necessity as well as an accounting one.

Payroll in Construction: More Complex Than It Looks

Construction payroll is rarely a straightforward exercise. Most construction businesses run a mixed workforce of directly employed PAYE staff, CIS-registered subcontractors and agency workers, often on the same site at the same time. Each category requires different treatment.

Cash Flow Management in Construction

Poor cash flow is one of the most common causes of construction business failure, and the sector has several structural features that make it particularly challenging:

• Payment terms of 30 to 90 days are standard throughout the supply chain, meaning costs are often paid well before income is received
• Retentions of typically 3% to 5% of contract value are withheld by the client for months or years after practical completion
• Materials and labour must often be funded upfront, before any progress claim is submitted or approved
• Late payment by main contractors remains a persistent issue in UK construction despite legislative protections

The solution is forecasting. Understanding the expected cash profile of every active project, when costs land, when applications are submitted, when payment is expected, allows you to identify gaps weeks or months in advance and take action before they become a problem.

The Prompt Payment Code, administered by the Small Business Commissioner, sets out the standards large businesses should meet when paying their supply chain. Knowing your rights here is important if you are regularly experiencing late payment from main contractors.

Construction Accounting Software: What to Look For

Generic accounting software was not built with construction in mind. While platforms like standard QuickBooks or basic Xero can handle invoicing and bank reconciliation, they typically lack the tools construction businesses need most: job costing, CIS handling, WIP reporting, and retention tracking.

Platforms commonly used in UK construction include Xero with construction add-ons such as Tradify or BigChange, Sage 200 Construction, COINS, and Procore for larger businesses. The right choice depends on your business size, number of active projects, and whether you need integration with project management or site management tools.

We advise on software selection and can support setup and integration as part of our service, making sure the system is configured to give you the job costing and reporting visibility your business needs.

Frequently Asked Questions About Construction Accounting