The Ruby Saloon Type ARQ, now referred to as the Ruby MK1, was launched in July 1934. The Ruby ARR, now the Ruby MK2, was launched in July 1936, commencing with chassis no: 249701.
When asked what the difference is many 'Seveners' will simply say that the MK2 has the 3 - bearing engine. In actual fact, this is not necessarily correct and there are also other, external and internal, differences which distinguish the two models. There are some small changes detailed in 'The Austin Seven Source Book' by Bryan Purves which are not immediately seen with a casual glance.
Engine:

A few late Ruby MK1s and the Ruby MK2 have the 3 - bearing engine which is identified
by the bolt mounted centrally on the n/s (left as driven) of the
engine above a vertical fin.

'The Austin Seven Companion' states at page 51 that 3 - bearing engines were introduced in June 1936 with engine No 249001 and were installed in last few of the MK1 Ruby.
Bryan Purves confirms in 'The Austin Seven Source Book' at page 444 that the 3 - bearing engine appeared in the Ruby MK1 from 16 June 1936 starting with car no: ARQ 35724; chassis no: 247765 and engine no: 249052. The engine having an output of 16.5 bhp at 3400 rpm.
Externally:

The MK1 has a near right angle at the base of the windscreen pillar onto the bonnet.

The MK2 has a
curve at the base of the windscreen pillar onto the bonnet.

The MK1 has a waistline moulding which runs from the front of the bonnet
on one side around the rear of the car and along the other side.

The MK2 waistline moulding is only along the sides finishing at the rear quarter where it widens and slopes downward.
Internally:

The MK1 rear windows are hinged at the front and opened at the rear with an over-centre clip.
The MK1 front seats have a spring loaded
locking bar, at the outer side of the seat frame, to pull out to
allow forward and back
adjustment with a pivot bolt at either side for tilting the seat.

The differences in our ‘Sevens’
Lubrication Chart for ARR Ruby & Variants
Wiring Diagram for ARR Ruby & Variants
The Ruby Mk 2 1937 (3 bearing crankshaft) From The Autocar, November 6 1936.
The Ruby Mk 2 1937 (3 bearing crankshaft) From Practical Motorist, March 27 1937.