Making Tax Digital (MTD) has been live for some time now, but significant changes have been made for 2026/27, and your business must be ready.
Originally announced more than 10 years ago, MTD for VAT began on 1 April 2019 and has applied to all VAT-registered businesses since April 2022.
From April 2026, MTD for Income Tax begins, a change that the government MTD campaign refers to as the biggest change since Self Assessment was launched more than 30 years ago. It will fundamentally alter the way you report Income Tax, splitting reporting – and therefore your business admin – throughout the year.
Keep reading for a look at five important steps you can take now to ensure you’re ready.
The new rules are being rolled out in stages, so you need to know what applies to you and when
From 6 April 2026, MTD for Income Tax will kick in for self-employed individuals and landlords with qualifying income over £50,000. Those on lower thresholds (over £30,000) will then join the scheme from April 2027, with further rollouts planned for the 2028/29 tax year.
Once the rules come into force for your qualifying income, you’ll be expected to log receipts and invoices regularly using compatible software and send quarterly – rather than annual – updates to HMRC. These will be made directly from an app on your phone, laptop, or tablet.
These updates aren’t tax returns, and you’ll still only receive an annual bill. But quarterly updates will allow you to view an estimate of your bill so you can plan ahead effectively.
The software will compile your tax return from your quarterly updates, so you won’t need to fill in as many forms. You just need to check the tax return, then submit by 31 January via gov.uk or the HMRC app as normal. The software will send the tax return directly to HMRC, who will calculate your bill.
The system is designed to make your life easier, but you’ll need to be prepared.
5 important steps to prepare your business
1. Check if the new rules apply to you
The first thing you’ll need to know is whether your qualifying income exceeds the April 2026 threshold of £50,000.
Put simply, qualifying income is your total annual gross income (turnover) from self-employment and property combined, and before any expenses are deducted. If this exceeds £50,000, you must now comply with MTD for Income Tax rules and provide quarterly updates.
Update periods and deadlines align with the tax year:
| Update period | Update deadline |
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May |
Familiarise yourself with these deadlines so that they aren’t accidentally missed.
2. Choose MTD-compatible software
Accounting software such as Sage, Xero, and Intuit QuickBooks is MTD-compatible, so get this set up if it isn’t already. Digital filing removes the risk of manual recordkeeping and links directly to HMRC to reduce stress and ensure you are always audit-ready.
The platform you choose will depend on the size of your business, but you’ll want to ensure your choice is easy for your team to use, can grow with your business, and integrates with your other systems, such as payroll or the spreadsheets you currently use to log records.
3. Set up digital record-keeping
The above software should help you produce quarterly updates automatically. But you might use other methods, such as spreadsheets, to keep records currently. It’s important to note that while this does qualify as “digital record-keeping”, the software itself isn’t MTD-compliant. Instead, you will need bridging software to create a digital link to your MTD software.
The bridging software you choose will connect existing spreadsheets or non-compatible records to your MTD software and HMRC. In addition, it will need to work for the size of your business and the systems you currently have in place, so begin shopping around now if you think you’ll need it.
4. Separate business and personal finances
You’ll want to ensure your MTD software is only pulling applicable business data, so be sure to keep your business and personal finances separate.
At Aspire, we understand how interlinked your business and personal finances are in your long-term plans. That means that we’re also well placed to help ensure a distinct line exists between both when it comes to HMRC-compliant reporting for MTD.
Be sure to get in touch if you need help with this.
5. Test your quarterly update process
Once your software and processes are in place, complete your preparations for a quarterly submission by testing your process.
Upload a mock quarterly report using your chosen bridging software and check that the data pulls through correctly. Do you know how to transfer this data from your Sage, Xero, or QuickBooks account to HMRC?
Completing a run-through now will highlight any areas of concern and allow you to iron out any issues before the pressure of a submission kicks in.
Get in touch
To find out more about how we can help you and your business comply with the new MTD for Income Tax rules, get in touch.
Email helpme@aspirellp.co.uk or call 0117 9303510.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
Production
of clients believe that working with us has helped or will help them achieve their financial goals
of clients who answered definitively said they would recommend us to their friends, family or colleagues
of clients said they were satisfied with our communications during times of market volatility.