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Written By Amy Smith
Making Tax Digital 2026: What You Need to Know Before April
The way many UK businesses report their tax is changing. From April 2026, the government’s HM Revenue and Customs initiative known as Making Tax Digital will start to affect a large number of self-employed individuals and landlords.
While the transition may feel daunting, understanding what’s coming and preparing early can make the process much smoother. In this guide, we explain what Making Tax Digital (MTD) means and what you should do before the new rules come into effect.
Making Tax Digital is part of the UK government’s long-term plan to modernise the tax system. The aim is to move away from paper records and annual tax submissions towards a fully digital system.
Under MTD for Income Tax Self Assessment, taxpayers will need to:
· Keep digital records of income and expenses
· Use MTD-compatible software
· Submit quarterly updates to HMRC
· Complete a final end-of-year declaration
The goal is to reduce errors and help businesses keep better track of their tax throughout the year.
MTD will not apply to everyone at once. The rollout will happen in stages:
· From April 2026 – self-employed individuals and landlords with income over £50,000 must comply
· From April 2027 – the threshold drops to £30,000
· From April 2028 – the government plans to extend the system to those earning over £20,000
Qualifying income includes combined income from self-employment and property.
For example:
· A sole trader earning £40,000 from their business and £15,000 from rental property would need to comply from April 2026.
Currently, many taxpayers submit one Self-Assessment tax return each year.
Under MTD for Income Tax, you will typically need to submit five reports per year:
1. Four quarterly updates showing income and expenses
2. One final declaration confirming your tax position
These quarterly submissions give HMRC an ongoing view of your tax position rather than waiting until the end of the year.
One of the biggest changes is the requirement to keep digital records.
In practice, this means:
• No manual bookkeeping systems
• No submitting figures directly through HMRC’s existing Self-Assessment portal
• All submissions must be made using approved accounting software, such as in-house MTD-compliant software for very small records or platforms like Xero (our recommended option), QuickBooks, or Sage
The good news is that many businesses are already using cloud accounting software, which should make the transition much easier.
Making Tax Digital also introduces a points-based penalty system.
· Each late submission earns a penalty point
· Once the threshold is reached, a £200 fine is issued
· Points reset over time if submissions are made on time
Different types of submissions have different thresholds, with quarterly updates typically triggering penalties after four missed submissions.
Preparing early can help avoid disruption.
Early preparation can help you:
· Understand whether the rules apply to you
· Move your records to digital systems
· Get familiar with quarterly reporting
· Avoid last-minute stress and penalties
Many businesses are choosing to adopt digital bookkeeping before it becomes mandatory so they can adjust gradually.
For many business owners and landlords, the biggest challenge will be adapting to quarterly reporting and digital record-keeping.
An accountant can help by:
· Identifying whether you will be affected by MTD
· Setting up suitable accounting software
· Ensuring your records meet HMRC requirements
· Submitting quarterly updates on your behalf
· Providing tax planning advice
Making Tax Digital represents one of the biggest changes to the UK tax system in decades and many people are still unaware of what it involves.
If you’re unsure how the new rules will affect you, getting professional advice early can save time, money and stress.
At Findlay Todd Accountants, we work with sole traders, landlords and small businesses to help them prepare for upcoming tax changes.
If you would like advice on Making Tax Digital 2026 or digital bookkeeping, get in touch with our team today!