Rachel Reeves’s recent Spring Statement marked the beginning of the 12-month countdown to the wider expansion of the government’s Making Tax Digital (MTD) initiative. The next stage of MTD development means that as of April 2026, sole traders and landlords with an annual income upwards of £50,000 will need to comply with the new MTD regulations for tax self-assessment.
These changes are a significant development in the modernisation of the tax system, designed to boost the tax efficiency and accuracy of self-assessment submissions.
For business owners and landlords, understanding the changes and new regulations is critical. This article will help you to prepare your business for MTD, outlining the compliances that must be met, and providing steps to ready your business.
What is Making Tax Digital?
Making Tax Digital is a government initiative, implemented by HMRC, designed to digitise the UK’s taxation system. It has been introduced to drive efficiencies, reduce errors in submissions and aid in uniformity by requiring the use of compatible softwares.
MTD was first rolled out in 2019, impacting only VAT-registered companies with turnovers over the VAT threshold (£85,000). April 2022 saw this expanded to impact all VAT-registered companies, regardless of turnover.
MTD for Income Tax Self-Assessment (MTD for ITSA) is the initiative’s next major milestone, and comes into effect in April 2026 impacting self-employed persons and landlords with annual incomes exceeding £50,000.
April 2027 sees this expand further to self-employed persons and landlords earning over £30,000.
Who needs to comply?
You will need to comply with the upcoming MTD rules if you fall into one of the following categories:
- VAT-registered companies (should already be in compliance)
- Self-employed persons or landlords earning a combined total of £50,000 (compliance from April 2026)
- Self-employed persons or landlords earning a combined total of over £30,000 (compliance from April 2027)
If you are unsure whether MTD rules will apply to you, or are unsure as to how to prepare for the changes, get in touch with Cooper Associates Accountancy and our team of expert accountants will be able to provide assistance.
What do you need to do to comply?
To comply with the MTD rules, you or your business must:
- Keep electronic records of all business expenses.
- Use a compatible software to submit your records to HMRC (Quickbooks and Xero being the most common choices but bridging software can be used if records are maintained on spreadsheets)
- Submit records on a quarterly basis rather than annually.
It should be noted that it is not essential to use accounting software to maintain records. Individuals using spreadsheets can continue to do so, however these spreadsheets must be uploaded into a compatible software for submission.
If you are uncertain as to what softwares options are available, please, speak to one of our accountants who will be happy to assist you.
How to prepare your business
With the MTD deadline fast approaching, it is recommended that you take proactive steps now to ensure you’re ready to make the switch:
- Review your current systems
The first step in ensuring that your business is ready for MTD is to review how you are currently keeping records. Are you using a digital or paper-based system? Are you using any softwares? If so, is it MTD compatible?
- Choose the right software for you
If you aren’t already using digital software, now is the time to make the switch. Popular choices include Quickbooks and Xero, which integrate well with HMRC, making submissions as easy as possible.
- Train your team
If you have people in your organisation responsible for bookkeeping and tax return submissions, it is vital to ensure they understand the new requirements and are able to use any software.
- Speak to a professional
An experienced accountant will be able to help you make the switch to MTD seamlessly. They will be able to help you to choose software, set up digital records, and provide ongoing support to ensure that you remain compliant, saving you time and stress.
Speak to us
At Cooper Associates Accountancy, we’re already helping sole traders and businesses of all sizes prepare for Making Tax Digital. Whether you’re worried about the implications or need guidance on choosing the right software, our expert team is on hand to support you every step of the way.
Get in touch today to find out how we can help your business stay compliant and make the most of the move to digital tax.
