Preparing for an audit is rarely anyone’s favourite task, but it is an unavoidable part of running a resilient and well-governed business. At Dunkley’s, we work with businesses of all sizes and see first-hand that audits and compliance checks are becoming more frequent, more targeted and more data-driven. With HMRC under pressure to close the tax gap and investing heavily in staff and technology, being audit-ready has never been more important.
This guide explains what a business audit really means, why compliance matters more than ever in 2025/26, and the practical steps you can take to prepare your business so that any audit or review runs as smoothly as possible.
Why Audits and Compliance Matter in 2025/26
Government data shows that small businesses now account for around 60% of the tax gap, largely due to errors, poor record-keeping and failures to take reasonable care. In response, HMRC completed approximately 316,000 compliance checks in 2024/25, combining traditional inquiries with preventative measures such as nudges, education and data matching.
Overall compliance yield reached an estimated £48bn in 2024/25, demonstrating just how effective HMRC’s approach has become. For business owners, this means a higher likelihood of scrutiny and a stronger need for robust internal controls, sound governance and accurate, up-to-date records.
What Do We Mean by a “Business Audit”?
The term “audit” is often used broadly, but it can mean different things in practice:
- Statutory financial audit
A regulated review of a company’s annual accounts to confirm they give a true and fair view under UK GAAP or IFRS. - HMRC compliance check or tax inquiry
A review of one or more taxes, such as corporation tax, VAT or PAYE. HMRC may request records, explanations and supporting documents and can amend returns if errors are found. - Other audits and reviews
These may be requested by lenders, investors or regulators and range from limited procedures to full internal audits.
This article focuses on statutory audits and HMRC compliance checks, as these affect most businesses.
Who Needs a Statutory Audit?
For financial years beginning on or after 6 April 2025, a private company may qualify for audit exemption if it meets at least two of the following:
- Turnover of no more than £15m
- Assets of no more than £7.5m
- 50 or fewer employees
However, audits remain mandatory for public companies, certain regulated businesses and companies without group exemptions. Even where an audit is not legally required, shareholders, lenders or potential buyers may still request one.
HMRC Compliance Checks: What to Expect
HMRC uses data analytics and cross-checks to identify inconsistencies, such as:
- Dividends that appear high compared with profits
- VAT returns that do not align with accounts
- PAYE or CIS figures that suggest employment status risks
- Large or unusual relief claims, particularly R&D
A compliance check is not an accusation of wrongdoing, but it does require careful handling. Clear records, timely responses and well-supported calculations can significantly reduce stress and disruption.
How the Autumn Budget Shapes the Compliance Environment
The Autumn Budget 2025 kept headline tax rates stable, but reinforced HMRC’s focus on enforcement. Increased investment in compliance teams and digital tools means more reviews and faster follow-ups. For businesses, the message is clear: while the rules may be stable, scrutiny is increasing.
Getting Audit-Ready: Practical Steps
Good preparation makes a real difference. Key habits include:
- Keeping complete, timely digital records
- Reconciling bank accounts, VAT and PAYE regularly
- Documenting key judgments and estimates
- Ensuring director remuneration and dividends are properly authorised
- Maintaining clear tax working papers and reconciliations
These steps not only support audits but also improve day-to-day financial management.
Closing Thoughts
The 2025/26 tax year sits in a period of steady rules but rising scrutiny. You cannot eliminate the possibility of an audit or compliance check, but you can control how prepared you are. Consistent records, clear documentation and regular reviews put your business in a strong position if questions arise.
At Dunkley’s, we help businesses prepare for audits, respond to HMRC compliance checks and strengthen their financial processes so they can approach any review with confidence.
For advice and support on any aspect of your business finances, our experienced team at Dunkley’s Accountants are here to help. Call us on 01454 619900, or email us to book in a meeting at advice@dunkleys.accountants.