We’re now just three months away from the next stage of Making Tax Digital (MTD) starting in April 2026. This phase will require self-employed individuals and landlords earning over £50,000 annually to maintain digital records, submit quarterly updates, and use MTD-compatible software.
MTD is the government’s initiative to modernise the tax system. The overarching goal is to reduce the burden of tax administration by addressing challenges associated with manual record-keeping, minimising errors in reporting, and streamlining processes for taxpayers.
MTD has already been rolled out for all VAT-registered businesses, with the next 3 years focusing on self-employed individuals and landlords, with differing degrees of income.
While adapting to MTD may present a steep learning curve for many, it’s important not to bury your head in the sand. By starting preparations now, you’ll not only find the transition smoother come deadline day but also unlock the numerous benefits that MTD brings.
How to prepare for Making Tax Digital
If you want to get MTD-ready, here are some practical steps to help you navigate the transition smoothly and confidently.
1. Plan Ahead
Timeline: With April just around the corner, discuss a timeline with your accountant for learning and implementing the necessary software.
Support Level: Decide how much support you’ll need from your accountant. Will you rely on them heavily, or will you handle most tasks independently before seeking their assistance for final submissions? If uncertain, discuss the options available.
2. Master Your Software
Training: By this April, ensure you’re proficient with your chosen software. Take advantage of online webinars and training sessions beyond what your accountant may suggest. Resources like LinkedIn and the software provider’s mailing list can be valuable.
3. Separate Business and Personal Finances
Dedicated Bank Account: Open a dedicated business bank account (or even just set aside a separate personal account for your business) to simplify administration. This allows you to connect your bank feed to your software, reducing the need to manually sift through transactions.
4. Address Complex Tax Affairs
Multiple Income Streams: If you have several rental income streams or self-employments, select software that can consolidate them efficiently. Remember that MTD requires a submission for each distinct trade, one combining all of your UK property, and another for each Foreign Property..
Jointly Owned Properties: For shared property income, choose software that accommodates joint ownership and ensure processes are established with your co-owners.
The Positives of MTD
It may feel like a lot of work but it’s important to understand the many benefits which come with MTD. Making Tax Digital (MTD) has the potential to transform how SMEs manage their finances, offering several significant advantages that go beyond tax compliance.
- Enhanced Accuracy: Digital tools reduce errors in tax reporting by automating calculations.
- Time Efficiency: MTD-compatible software simplifies and speeds up administrative tasks.
- Real-Time Insights: Gain instant visibility into cash flow, income, and expenses.
- Stronger Accountant Collaboration: Quarterly updates allow for proactive tax planning with accountants.
- Simplified Compliance: Streamlined processes make it easier for SMEs to meet tax obligations.
- Expense Capture: The regularity of MTD means you’re less likely to miss any expenses, and therefore tax savings.
- Opportunities for Growth: Digital tools improve productivity and business performance.
- Future-Proofing: Early adoption prepares SMEs for evolving tax regulations and trends.
When will I be impacted by MTD?
MTD will expand further by 2028 and over the next three years, the rollout schedule will be:
- April 2026: Sole traders and landlords with gross income over £50,000.
- April 2027: Sole traders and landlords with gross income over £30,000.
- April 2028: Sole traders and landlords with gross income over £20,000.
Get in touch with DJH
Feeling overwhelmed by Making Tax Digital? Don’t worry – you’re not alone. Our team is here to help SMEs navigate the transition with ease.
Whether you need advice on choosing software, separating finances, or tackling complex tax affairs, we’ve got you covered. Get in touch today for personalised guidance and practical solutions that save you time, reduce stress, and maximise the benefits of digitalisation.
Let’s make your journey into MTD a great success, together!
