It’s not easy being a small business in the UK. While resilience has long been their hallmark, today’s environment is testing even the most adaptable firms. Economic uncertainty, rising costs and evolving customer expectations are being compounded by digital and regulatory changes. For many small businesses, it’s becoming increasingly difficult to know which developments matter most and how to respond.

For small businesses, you can’t control the pace of change. But you can take practical steps to navigate it with more clarity and confidence. Here are three actions every small business should consider now to stay one step ahead.

Don’t ignore AI (even if you’re not using it yet)

Artificial intelligence (AI) continues to play a central role in the UK’s innovation strategy, as highlighted by the £2bn investment in the recent Spending Review. And it’s starting to attract more structured attention from the government. In January, the Department for Science, Innovation and Technology (DSIT) published the AI Opportunities Action Plan – a strategic roadmap aimed at accelerating AI adoption, boosting productivity and preparing the ground for future policy.

Although not legislation, the plans signal a clear intent that the government intends to make AI more accessible across the economy, including for small businesses.

To prepare, it’s a good idea to stay informed and open to AI developments. Experimenting with automated systems and tools, or speaking to trusted advisors, can uncover simple ways to take advantage of AI, such as automating invoice reminders or improving cash flow forecasting.

Those who invest time in understanding what’s possible now will be better positioned to adapt and grow as AI technology and policy evolve.

Make technology work for you, one step at a time

The pressure to digitise can feel overwhelming, but transformation doesn’t have to happen overnight. New research shows that equipping small businesses with the right technology could unlock £77 billion in economic growth. However, inertia and uncertainty prevent many from getting started.

The most effective approach is often the simplest: identify a major day-to-day pain point – whether it’s cash flow, inventory, or time tracking – and test a tool designed to address it. There’s a growing ecosystem of digital advisors, including accountants and bookkeepers, who support small businesses with finding the right technology for them. 

Free trials and government-backed support schemes, such as the now-concluded Help to Grow initiative, have helped thousands of businesses access discounted software and expert guidance. While that particular scheme has ended, its legacy underlines the role public policy can play in encouraging digital adoption, and more initiatives are likely to follow as the government continues to prioritise productivity and innovation among SMEs.

Progress in digital adoption is cumulative. Each step builds confidence, capability, and competitiveness, allowing you to adapt at your own pace while still gaining tangible benefits. It also puts you in a stronger position to adapt quickly if new policies are introduced, reducing stress and helping you keep ahead of the curve.

Adapting to HMRC’s tax transformation

One of the most significant regulatory changes on the horizon is the rollout of Making Tax Digital for Income Tax (MTD for IT). From April 2026, self-employed individuals and landlords earning over £50,000 will need to keep digital records and submit quarterly updates to HMRC. Those earning above £30,000 will follow in 2027.

This shift is part of HMRC’s broader Transformation Roadmap, published in July 2025, which outlines the government’s vision for a more modern, efficient and automated tax system. The roadmap emphasises digital-first approaches and aims to reduce administrative burdens for small businesses.

To avoid disruption and a last-minute rush to comply, begin preparing now. Digital record-keeping will not only be mandated by government, but delivers long-term benefits such as improved cash flow visibility, faster collaboration with accountants and fewer end-of-year surprises. With the Transformation Roadmap setting the stage for financial administration, small businesses can’t hide from changes as the government puts technology at the heart of tax reform.

Xero is here to support you through these changes, with our HMRC-recognised software as well as helpful resources and human support when you need it. Xero’s Simple plan has access to everything small businesses need to be MTD-compliant, from digital record-keeping right through to final submissions. 

Navigating change with confidence

The digital and regulatory landscape is evolving fast. While you might not have control over every new development, you can take charge of how you adapt. By staying informed about policy shifts like MTD for IT, evaluating digital tools that make practical sense and building confidence with AI-powered tools, you can turn potential disruption into opportunity.

Support and guidance from a range of sources, including industry groups, government schemes and trusted advisors, can help you make informed, sustainable decisions. Ultimately, when small businesses thrive in a digital world, the whole economy benefits.

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