Making Tax Digital (MTD) is no longer a distant policy idea – from April 2026 it becomes a live requirement for hundreds of thousands of UK sole traders and landlords. HMRC is replacing the familiar annual self-assessment return with a system of digital record-keeping and quarterly updates that feeds data directly to its systems. If your gross trading or property income tops £50,000, you will be in the first wave; those earning £30,000 must follow in April 2027, and the threshold drops again to £20,000 in April 2028. In total, government figures show that more than 2.6m individuals will join the scheme over the three year roll-out.
For many people, the change feels demanding: new software, more deadlines and an unfamiliar penalty regime. Yet the story is not only about compliance. HMRC’s review of MTD for VAT found that around two-thirds of businesses recorded at least one measurable benefit after adopting digital processes (HMRC, 2025). Better accuracy and faster cashflow insight came top. Add to that the fact that 97% of UK households had fixed or mobile internet access in 2024 (Office for National Statistics, 2024), and the infrastructure puzzle is largely solved.
In this article, we explain who must comply, what will actually change and how to build a practical timetable that keeps penalties – and stress levels – to a minimum.
Why making tax digital matters in 2025/26
The rules arriving in April 2026 are the biggest procedural change to personal tax since self-assessment was introduced in the 1990s. Quarterly updates replace the single January rush, spreading work throughout the year but requiring disciplined bookkeeping. Those who treat the change as an opportunity rather than a burden stand to gain: real-time profit data, timely tax forecasts and more meaningful conversations with advisers.
Who must comply and when
- April 2026: Those whose gross self-employment or property income is above £50,000. About 780,000 individuals enter the regime first.
- April 2027: Threshold falls to £30,000, adding roughly 970,000 more taxpayers.
- April 2028: Final drop to £20,000 captures a further 900,000.
Remember that the threshold is based on total gross income across all sole-trade and property sources, not the profit figure. If you run two businesses, their takings are added together.
Exemptions exist for those who cannot use digital tools because of age, disability, remoteness or religious grounds, but you must apply to HMRC – exemption is never automatic.
Choosing the right software
The backbone of MTD is compliant software. The main cloud packages – Xero, Sage, FreeAgent and QuickBooks – are already approved, and specialist landlord tools such as Landlord Studio have followed suit. When comparing products, look for the following:
- Bank feeds: Automatic imports reduce typing errors.
- Receipt capture: Photograph receipts on your phone and post them straight to expenses.
- Multi-business support: This is essential if you have more than one trade or several properties.
- Adviser access: Let us log in and review data without endlessly emailing spreadsheets.
A short free trial is usually available; use it to check that reports look sensible and the interface feels intuitive.
A 12-month action plan
At 12 months out
- Current position: Confirm your gross income and your expected start date.
- Budget: Allow for software licences, possible hardware upgrades and training time.
- Early discussion: Book a call with us so we can map the gaps together.
At nine months out
- Software decision: Choose, purchase and set up the package.
- Training: Work through the vendor’s starter modules.
- Draft workflow: Draw up a calendar showing weekly bookkeeping and quarterly update tasks.
At six months out
- Data migration: Import at least the current tax year’s transactions.
- Bank feeds and rules: Link accounts and create auto-coding rules for regular spend.
- Receipt process: Decide who scans, who approves and how often.
At three months out
- Dry run: Produce a mock quarterly update and send it to us for a sense-check.
- Checklists: Finalise weekly, monthly and quarterly task lists and share them with staff.
At one month out
- System audit: Confirm feeds are live, reconciliations balance and user permissions are correct.
- Deadline reminders: Put all four submission dates plus 31 January in your diary three times; two weeks before, three days before and on the day.
Go-live
From 6 April, start recording everything digitally and aim to submit the first quarterly update well before 7 August. Review the process with us, tweak any rules that miscategorise items and document what you learned for the next quarter.
Avoiding penalties with disciplined processes
MTD introduces a points-based penalty system. Miss any submission deadline and you gain one point; reach four points and you receive a £200 fine. Points expire after two years if you stay below the four-point line, but once you hit the threshold you must demonstrate 12 months of perfect compliance to reset to zero. Late payment penalties are separate and begin 15 days after the due date: 3% of the tax owed rises to 6% after day 30, with daily interest thereafter.
Setting a routine will make compliance easier.
- Weekly bookkeeping: Record income and expenses as they happen.
- Monthly reviews: Reconcile bank accounts and scan any unfiled receipts.
- Quarterly focus days: Close the books a fortnight before each update, giving yourself a buffer.
We recommend automating as much as possible. Bank rules, recurring invoices and scheduled reports reduce human error and free up time for higher value work.
Ready to act?
MTD is happening, but you still control how prepared you will be when the first submission window opens on 7 August 2026. A measured plan, tested software and regular habits turn the reform from a compliance headache into a chance to gain sharper insight into profit trends and cashflow. Extra visibility also lets us advise you on pension contributions, capital allowances and timing of major purchases while there is still time to act – not nine months after the event.
We have been guiding businesses through statutory change for more than 180 years and we are ready to guide you now. If you would like practical help selecting software, migrating data or simply a second pair of eyes on your first quarterly update, get in touch today. Our team will ensure MTD becomes just another smooth-running part of your finance routine – and not a last-minute scramble.