Making Tax Digital is here!

Making Tax Digital (MTD) has become mandatory for many self‑employed individuals and landlords from 6 April 2026, and the change marks a decisive shift in how HMRC expects taxpayers to keep records and report income. You can see this as both a challenge and an opportunity: those who prepare early will find the transition far smoother, while those who delay may face unnecessary stress, penalties, and disruption.

MTD for Income Tax applies first to individuals with business or property income above £50,000 with businesses turning over £30,000 joining the system in April 2027. The annual Self-Assessment return will be replaced by quarterly digital updates, an End‑of‑Period Statement, and a Final Declaration. All records must be kept digitally, and submissions must be made through HMRC‑approved software.

What MTD means in practice

The move to digital reporting is designed to reduce errors, improve accuracy, and give taxpayers a clearer picture of their tax position throughout the year. Quarterly updates will summarise income and expenses for each three‑month period, helping HMRC receive information in real time rather than once a year. For many businesses, this will also encourage better bookkeeping habits and more up‑to‑date financial information, which will help you run your business and make decisions when they matter.

However, the shift requires planning. Those who currently rely on paper records or spreadsheets will need to adopt new systems and everyone affected will need to become comfortable with more frequent reporting deadlines.

What you need to do now

1. Check whether your income level brings you into the first wave of MTD. If your combined business and property income exceeds £50,000, you must comply from 6 April 2026.
2. Ensure business and personal finances are clearly separated, ideally with a dedicated business bank account. This makes digital reporting far easier and reduces the risk of errors.
3. Choose compliant accounting software that can record income and expenses digitally and submit quarterly updates directly to HMRC. Many options are available, from simple apps for sole traders to more advanced systems for larger businesses.
4. Set up digital record‑keeping for all income and expenses. This may include using bank feeds, receipt‑scanning tools, or dedicated property‑management features for landlords.
5. Review your current bookkeeping process to identify gaps. If records are incomplete, inconsistent, or stored in multiple places, now is the time to streamline.
6. Speak with your accountant early to understand how quarterly updates will work and what information you will need to provide. Professional support can prevent mistakes and ensure a smooth transition.

Allison Hamilton is an Accountant at Abac, Chartered Accountants.

This article is for general information only. You are recommended to seek professional advice before taking action on the basis of the contents of this article.