Making Tax Digital is here – what small businesses need to know now

Making Tax Digital for Income Tax (MTD for IT) is now live for sole traders and landlords earning over £50,000. For many of you, that will mean your path to tax compliance has officially become digital-first and you’ll be moving away from one annual tax return to a more regular reporting cycle.

If you’re in the first wave, you’ll need to start keeping digital records of income and expenses, submit quarterly updates using HMRC-recognised software and complete a final end-of-year declaration that finalises the year’s tax position.

The next deadline is coming up

April 2026 marked the starting point for digital record keeping, and the next milestone is already in sight. Your first quarterly update, summarising income and expenses from 6th April 2026 to 5th July 2026, will be due by 7th August.  

Encouragingly, our latest research shows that 58% of you feel on track to meet the first filing deadline.Many have already started moving in the right direction by taking action to understand the changes (44%), adopting HMRC-recognised software or processes (42%) and signing-up for MTD for IT with HMRC (41%).

However, while the majority of small businesses and landlords in the first wave have taken steps to prepare, 28% are still unsure if they’ll be able to make the first filing deadline and 14% have not yet taken any action highlighting how new and unfamiliar the changes might feel. For those in this position, the good news is there is still time to get things into place.

Making sense of what’s required

One of the biggest challenges is simply understanding what needs to be done. In fact, over four in five (81%) say you would welcome more clarity on key areas of compliance.

The questions are often practical and common areas of confusion are what should go into quarterly updates compared to the final declaration (43%), when penalties and fines will be applied (41%) and whether thresholds are based on turnover or profit (31%).

It’s understandable that this could create concern, with over a third (37%) worried about making mistakes that could lead to fines. Breaking the process down into smaller, manageable steps can help reduce that pressure and make the transition feel more achievable.

Taking the next step

Moving to digital recordkeeping and quarterly reporting means finding a new rhythm. Rather than pulling all the numbers together at the end of the year using manual methods, it becomes about keeping records up to date on a more frequent basis using digital tools.

A good place to start is choosing the right software and signing-up with HMRC. You’ll need a solution that is HMRC recognised and simple to use. Ideally, it should bring your financial admin together so you can log expenses, manage tax and keep on top of your finances for all of your business activities  in one place.

Once your software is set-up, start testing out features that can save you time and make life easier. For example, you can snap a photo of a receipt on your phone to log expenses instantly, or link your bank account so transactions flow in automatically.

Keeping your records up to date, capturing transactions automatically and recording expenses as they happen will all help reduce the pressure at each deadline and improve accuracy so data flows straight through to the quarterly update or final declaration.

That adjustment can feel significant at first, so if you’ve already started then focus on building consistency. If you’re earlier in the process, even small changes can help you establish good digital habits that quickly become part of your day-to-day routine, rather than an additional task.

Getting the right support in place

Finally, don’t feel like you have to navigate the changes alone if you’re still feeling unsure. Many of you are already turning to trusted sources for support, with two in five (40%) speaking to an accountant or bookkeeper who can help you cut through the confusion and work through what the changes mean in practice.

As you transition to digital tax and your financial data becomes more current and accessible, you should find there is even an opportunity to hold more meaningful conversations with advisors throughout the year. MTD for IT will provide access to real-time business information that can be used to help you make better decisions about investment, hiring and growth.

Looking at the longer-term benefits

There’s no doubt that MTD for IT represents a change in how tax is managed. While the immediate focus is on getting ready, around three quarters (76%) believe MTD for IT will help you gain a better understanding of your tax position throughout the year and 72% expect it to save time compared to completing an annual self-assessment.

Taking it step by step can help build confidence and create a digital-first way of working that supports the business over the long term. With the right tools and support in place, you’ll be able to move forward with more confidence and have the financial data at your fingertips that can be used for better day-to-day decision making – from managing cash flow to planning ahead.

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