What You Need to Know (Before It Becomes a Problem)
Making Tax Digital (MTD) isn’t new… but for many business owners, it’s about to become very real.
Over the next couple of years, HMRC is changing how tax is reported, moving everything to a fully digital system. And if you’re not prepared, it could mean stress, confusion, and potential penalties.
So let’s break it down in plain English.
What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC’s plan to modernise the UK tax system.
Instead of submitting one tax return each year, businesses and individuals will need to:
- Keep digital records
- Use MTD-compatible software
- Submit quarterly updates to HMRC
In short: no more scrambling once a year — it’s all about real-time, accurate reporting.
Who Does MTD Affect?
MTD is already in place for VAT-registered businesses.
But the big change is coming for income tax.
From:
- April 2026 – self-employed individuals and landlords earning over £50,000
- April 2027 – those earning over £30,000
If that’s you, this isn’t something to ignore — it’s something to get ahead of.
What Does This Mean for You?
If you’re currently:
- Using spreadsheets
- Keeping paper records
- Or handing everything over once a year
Then things will need to change.
Under MTD, you’ll need to:
- Record income and expenses digitally
- Submit updates every quarter
- Finalise your position at year-end
That’s a shift not just in tools, but in habits.
The Risks of Leaving It Too Late
We’re already seeing it…
Business owners leaving things until the last minute, then feeling overwhelmed.
The risks?
- ❌ Rushed or inaccurate records
- ❌ Missed deadlines
- ❌ Penalties from HMRC
- ❌ Unnecessary stress
And let’s be honest no one wants more admin pressure.
The Opportunity (Yes, There Is One)
Done right, MTD can actually improve your business.
When your numbers are up to date, you can:
- Make better financial decisions
- Spot problems earlier
- Manage cash flow more effectively
- Feel more in control
This isn’t just about compliance it’s about clarity.
How to Get Ready Now
The best approach? Start before you have to.
Here’s what we recommend:
1. Review how you currently keep records
Is it manual, spreadsheet-based, or already digital?
2. Move to cloud accounting software
Tools like Xero make MTD compliance much easier (and quicker).
3. Get into a monthly habit
Don’t wait until year-end — keep things updated regularly.
4. Get support if you need it
This is exactly what we help clients with every day.
Jenner’s Tip 💡
Don’t wait for the deadline to force your hand.
Getting set up now means a smoother transition, less stress, and better control of your numbers.
Frequently Asked Questions (FAQs)
Do I have to use accounting software for Making Tax Digital?
Yes. Under MTD, you’ll need to use compatible digital software to keep records and submit your updates to HMRC. Spreadsheets on their own won’t be enough unless they’re linked to bridging software.
What happens if I don’t comply with MTD?
If you don’t follow MTD rules, you could face:
- Late submission penalties
- Fines for inaccurate records
- Ongoing compliance issues with HMRC
The key is getting set up early so you’re not caught out.
Will I need to submit four tax returns a year?
Not exactly.
You’ll submit quarterly updates showing your income and expenses, plus a final declaration at the end of the year.
So yes more frequent reporting, but not four full tax returns.
Does MTD apply to small businesses?
Yes if your income meets the thresholds:
- Over £50,000 from April 2026
- Over £30,000 from April 2027
Even smaller businesses may be brought in later, so it’s worth preparing now.
I’m a landlord does this affect me?
Yes. If your rental income exceeds the thresholds, you’ll need to follow MTD for Income Tax, just like the self-employed.
Can my accountant handle MTD for me?
Yes but you’ll still need to:
- Keep your records digitally
- Share information regularly
The process becomes more collaborative, rather than a once-a-year handover. We can help you if you get in touch early.
Is MTD going to cost me more?
There may be some additional costs (such as software), but many clients find:
- Time savings
- Better visibility of finances
- Fewer surprises at year-end
…more than make up for it.
What’s the biggest mistake people make with MTD?
Leaving it too late.
We’re already seeing businesses assume “it’s ages away” and then suddenly it isn’t.
Do I need to change to Xero?
Not necessarily but you do need software that is MTD-compliant.
We often recommend Xero because it’s user-friendly and works well for most businesses, but the right choice depends on you.
Final Thoughts
Making Tax Digital is coming whether we like it or not.
But it doesn’t have to be overwhelming.
With the right systems and support in place, it can actually make running your business easier, not harder.
Need Help Getting MTD Ready?
If you’re unsure where to start or know your records need a tidy-up we can help. Contact us here now.
📞 01432 379988
🌐 www.jennersacc.co.uk
Let’s get you set up properly, so MTD doesn’t become a last-minute panic.