If your business leases property, vehicles, or equipment, a significant change to UK accounting rules is on the way. Following the FRC's periodic review of UK GAAP, FRS 102 is introducing a
new leasing standard that brings it much closer to IFRS 16 effective for accounting periods beginning on or after 1 January 2026.
In practice, most leases currently treated as "operating leases" kept off the balance sheet will need to be recognised on the balance sheet as a right-of-use asset and a matching lease liability.
Short-term and low-value leases remain exempt.
This isn't just a compliance exercise it can affect reported assets, liabilities, EBITDA, and loan covenants. Businesses that start preparing now, rather than waiting until year-end, will have a
much smoother transition. We're happy to talk through what this could mean for your Business Central setup and reporting.
OLD MODEL
Operating leases off balance sheet
NEW MODEL (FROM 1 JAN 2026)
Right-of-use asset + lease liability on balance sheet
This is a general summary for awareness, not accounting advice please confirm the detailed requirements and transition options that apply to your business with your accountant or auditor.
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