What You Need to Know Before Making Tax Digital Begins

With the new tax year fast approaching, many businesses and individuals are preparing for the introduction of Making Tax Digital (MTD). From April 2026, sole traders and landlords earning over £50,000 will be required to submit quarterly updates to HM Revenue & Customs (HMRC), marking one of the most significant changes to the UK tax system in recent years.

It is estimated that around 900,000 taxpayers will join the scheme in its first phase. If you are affected, preparing early can help ensure a smooth transition and prevent unnecessary stress once the rules come into force.

MTD will require approved software

One of the core requirements of MTD is the use of compatible digital software to maintain records and submit updates. Whether you already use cloud accounting tools or still rely on spreadsheets and manual processes, now is the time to check that your systems meet HMRC’s requirements.

Moving to digital record-keeping can offer benefits beyond compliance. Many businesses find that accounting software helps streamline administrative tasks, improve cash flow forecasting, support better financial decision-making, and reduce the risk of errors. When selecting software, it is worth considering not only what meets the technical requirements but also what will best support the day-to-day running of your business.

You must register, it will not happen automatically

HMRC will contact taxpayers whose previous returns indicate they are likely to fall within the MTD rules. However, enrolment is not automatic. You will need to register in advance, so allowing plenty of time to do this is important.

Leaving registration until the last minute could lead to disruption in your reporting obligations, so early action is strongly recommended.

Are there any exemptions?

Some taxpayers are automatically exempt from MTD. For example, trustees and personal representatives of deceased estates are not required to sign up. HMRC will typically notify you if this applies.

There are also circumstances where you may apply for an exemption, depending on your situation. If you believe you may qualify, it is worth seeking advice to understand your options.

What if your income is below £50,000?

MTD is being introduced in phases:

·       From 6 April 2026: Sole traders and landlords with income above £50,000

·       From 6 April 2027: Those with income above £30,000

·       From 6 April 2028: Those with income above £20,000

Even if you are not yet required to comply, you may choose to sign up voluntarily. Doing so can give you time to adapt to the new processes before they become mandatory.

Does MTD apply to partnerships?

Not at present. However, HMRC has confirmed that partnerships will be brought into the MTD regime in the future, with further details expected in due course. Keeping informed will help you avoid being caught off guard when the timeline is announced.

Start preparing now

Choosing the right software and adapting to new reporting habits can feel daunting, but taking action early makes the transition far more manageable. With the right systems in place, many businesses find that digital accounting ultimately saves time and provides greater financial visibility.

If you would like support with Making Tax Digital, we can help you select suitable software, provide training, and manage your registration with HMRC. We can also assist with bookkeeping, quarterly submissions, and year-end returns, giving you peace of mind that everything is handled correctly.

Get in touch with our team to discuss how you can prepare for MTD with confidence.