Small business owners across the UK need to prepare for a significant change that will affect how they report their earnings to HMRC.
Making Tax Digital (MTD) for Income Tax Self-Assessment comes into force across the UK from April 2026 and will initially impact individuals and landlords with an income of more than £50,000.
What is Making Tax Digital?
The Making Tax Digital legislation is a key part of the UK Government’s Tax Administration Strategy. It aims to digitalise the tax system, making it more efficient and easier for individuals and businesses to get their tax right.
Impacted business owners and individuals are being urged to ensure they are ready for the transition to Making Tax Digital and to understand how this will impact them.
MTD for self-assessment was due to be introduced in April 2024 but HMRC delayed the transition to ease the pressure on businesses facing a challenging economic environment
Key changes for self-employed and landlords
Digital records: The era of paper receipts and manual record-keeping is coming to an end. Under the MTD legislation, businesses and individuals will be required to keep digital records, using MTD compatible software.
Software usage: The use of software that works with MTD will be mandatory. This software will allow you to create and store digital records of each of your business transactions.
Quarterly updates: Gone are the days of annual tax returns. Businesses will need to submit updates every quarter, bringing the tax system closer to real-time. An End of Year declaration will still be required – this will be similar to your normal self-assessment tax return.
Income thresholds: From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to comply. For those with an income of between £30,000 and £50,000 MTD will be introduced in April 2027.
The introduction of MTD represents a significant shift in the way businesses manage their taxes. By understanding these changes and preparing in advance, you can ensure a smooth transition to the new system.
Although the goal of is to make it easier for individuals and businesses to get their tax right, this poses a challenge for businesses with increased administration, new systems and the risk of actually submitting incorrect information to HMRC in real-time.
If you are unsure whether you’re ready for MTD or would like advice and support, please get in touch. 0808 144 5575 or email help@armstrongwatson.co.uk.
