You may have heard of HMRC’s Making Tax Digital (MTD) that will be starting in April 2026.
I have a few clients who are getting very worried about this, so I want to run through the key things you need to know about it, to hopefully put your mind at rest if you too are feeling nervous.
Who will be taking part
HMRC are signing everyone up in stages.
The first batch of people to enter the new system are those with either self-employment sales or rental income of £50k, or £50k when the two incomes are combined. This is your sale figures and not your profit.
In April 2027 those with sales of £30k will join and in April 2028 it will be £20k.
For the April 2026 group, the qualifying sales figure will be the one you entered on your 24/25 tax return and not your sales figure in the current (25/26) tax year.
What are the changes?
HMRC will require that everyone signed up to MTD makes quarterly submissions.
It is important to remember that these quarterly submissions are not tax returns. You will still need to complete your year end tax return as normal, and your tax payments will remain in January and July and will be based upon this final tax return.
The quarterly submissions are income and expenditure statements and will be prepared on the cash basis (so when you receive money and make payments; not based upon when you raise invoices).
Year-end adjustments for things like personal use, use of home and other non-cash items will be brought into your year end tax return as normal.
Why are HMRC doing this?
HMRC’s reasons for these quarterly submissions are to help people to keep better records and to keep in touch with where your year-end profits are likely to be.
Almost 500,000 tax returns are submitted on 31 January and one of the main reasons for people being unable to pay their tax bill is that they haven’t saved enough.
Being forced to do your bookkeeping more regularly may not tell you your tax bill but should remove the surprise of finding your taxable profit is higher than previously.
What are the deadlines?
The quarterly submissions will run alongside the tax year, so the first quarter will be 1 April to 30 June (or 6 April to 5 July) and the deadline will be the 7 August.
HMRC have said they will not apply penalties in the first year to allow for everyone (themselves included) to settle into the new system.
How can I get ready for MTD?
How much you need to do will depend on how you currently do your bookkeeping.
1) Everyone will need to have access to their HMRC personal tax account, so if you don’t have access to this, you will need to set this up.
This is because you will need to use your Government Gateway to register for MTD and to link your software to your HMRC account.
2) You will also need to have some accounting software to make your submissions. HMRC will not be providing this for you.
I would recommend FreeAgent or Xero for this. However, all the main brands will have an option for you (QuickBooks, SAGE, Zoho etc). I believe that the bank Starling will also have their Business ToolKit software MTD ready as well.
In terms of cost, if you have a Mettle/NatWest business bank account, you can get FreeAgent for free. Starling has hinted that their option will be free. The rest seem to be around the £7 mark with plenty having introductory discounts.
3) Start to streamline your bank accounts to minimalise your bookkeeping.
If you are someone who still uses a personal bank account for your business and/or spreads the expenses across multiple accounts (personal, credit card, PayPal etc) if you can, look to opening one bank account to use for business only.
As your submissions will be your money in and money out, having one account will make it considerably easier and faster to do.
Can I do the submissions myself or do I need an accountant/bookkeeper?
If your bookkeeping is good and you feel confident, there is no requirement to have someone complete and submit the quarterly submissions for you.
Your accountant can still do the year end adjustments and deal with your taxes as normal.
However, if the process feels overwhelming and/or this is an extra job that you don’t have the capacity for, then an accountant/bookkeeper can certainly help.
Also, some accountants may insist that they complete these for you to ensure accuracy.
It may be worth mentioning that as part of the submissions, HMRC will now see all your income and all of your expenses, rather than the lump sums that are entered on your tax return.
So, if you are someone who currently claims for items like your weekly shop, holidays and other household items, HMRC will now know, so I do expect to see an increase in tax investigations in these instances.
I hope that this has helped you to feel ready and possibly calmer about the upcoming changes.
For a lot of people, this will require very little adjustment to your current set up and routine other than remembering to submit the figures.
Also remember that this is a new system for everyone; HMRC, accountants and business owners so expect a few bumps if you are in the first batch to join in April 2026.
