If you run a small business or work for yourself, you’ve probably heard the phrase Making Tax Digital, often referred to as MTD, mentioned increasingly more over the past 12 months. But what does it mean and what do you need to do to stay compliant?

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Below, we explain what MTD is, who it affects, and how small businesses and the self-employed can prepare for MTD.

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What Is Making Tax Digital (MTD)?

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Making Tax Digital is a UK government initiative designed to modernise the tax system by moving it online. The aim is to make it easier for individuals and businesses to get their tax right by keeping digital accounting records, using HMRC-approved software, submitting quarterly updates, and reducing errors.

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MTD has already been introduced for VAT-registered businesses, and the next major phase, MTD for Income Tax, is just around the corner.

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When Does Making Tax Digital for Income Tax Start?

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From 6 April 2026, MTD for Income Tax will become mandatory for self-employed individuals and landlords earning over £50,000 per year.

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From April 2027, the threshold is expected to reduce to £30,000 per year.

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Who Does Making Tax Digital Apply To?

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You’ll be affected if you run a sole trader business, are self-employed or freelance, earn income from rental property, or currently submit a Self Assessment tax return.

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Limited companies are not yet included under MTD for Income Tax.

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What Will Change Under Making Tax Digital?

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Instead of submitting one tax return per year, you’ll send quarterly updates to HMRC throughout the year summarising your income and expenses.

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At the end of the tax year, you’ll confirm your final figures and submit a final declaration replacing the traditional Self Assessment return.

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You’ll also need to keep your records digitally using compatible accounting software.

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Why Making Tax Digital Matters for Small Businesses and the Self-Employed

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Making Tax Digital compliance isn’t just a regulatory issue. It will change how you manage your finances day-to-day.

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Benefits include better visibility of cash flow, fewer errors, less year-end pressure, and more up-to-date financial information.

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Challenges may include learning new software, adjusting bookkeeping habits, managing more frequent reporting, and staying on top of deadlines.

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How to Prepare for Making Tax Digital

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Even though MTD for Income Tax isn’t mandatory yet, you can prepare now by reviewing your bookkeeping system, moving away from paper records or spreadsheets if necessary, choosing HMRC-compatible software, and seeking professional advice to ensure compliance.

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Need Help with Making Tax Digital?

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Our accountancy team supports small businesses, self-employed individuals, and landlords in preparing for Making Tax Digital.

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Whether you need help with software, record setup, or managing submissions, we can guide you through the process.

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Getting Ready for Making Tax Digital

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Making Tax Digital is a significant shift in how tax reporting works, but with the right preparation and professional support, you can stay compliant and gain greater control over your finances.

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