Expert tips to make sure your business is ready for incoming Making Tax Digital changes

The self-assessment deadline isn’t an end to tax matters for another year

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Landlords and self-employed business owners may be rushing to meet the self-assessment deadline but there is another tax change to prepare for soon after.

January marks the 90-day countdown until HMRC’s new Making Tax Digital (MTD) reporting regime.

Under the changes, sole traders and landlords whose combined gross income from self-employment and/or property exceeds £50,000 a year will need to maintain digital records and use HMRC-compatible software to submit four quarterly updates and then a ‘final declaration’ to the taxman each year.

The new MTD rules will apply from 6 April 2026, replacing annual self-assessment tax returns. It is expected to initially affect around 780,000 landlords and entrepreneurs.

HMRC claims it will give users between 26 and 40 hours of time back from completing digital record-keeping more efficiently, reducing repeated work, and streamlining the preparation and submission process.

But with only a few months to go until the changes, research by Intuit QuickBooks has found that 22 per cent of eligible businesses are still exploring options and almost one in ten are aware of MTD but are yet to take any action.

HMRC lack info drive

36-year-old gym owner Kirk Stephenson who runs Cross Fit Utopia in Leeds said he has heard very little about the changes, beyond a brief mention by his accountant.

He told The Independent: “There has been a lack of information about how we should prepare.

“Surely HMRC sends us out statements for tax and business rates, why haven’t they sent out information on this?

“I’m sure it will be positive and help make managing our finances easier. We will have to set aside money more regularly. But as with everything in this country there are likely to be teething issues.”

Nick Williams, international product director, at Intuit, added: “Anyone who has a tax return to complete knows that January doesn’t feel like a fresh start, just more unfinished admin.

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“Making Tax Digital offers a chance to break that cycle, and the potential 40-hour time saving is a rare gift. With 90 days to go, our goal is to ensure the technology clears the path.”

Here is how the experts suggest you can prepare for MTD.

Conduct a ‘dry run’

Don’t wait until the mandated start date to test your systems.

Sarah Coles, head of personal finance for Hargreaves Lansdown, suggests getting started now will give you time to get to grips with the software you have to use, and understand the new service.

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She said: “If the change starts to make the process too time-consuming, it gives you a chance to find an accountant to help too.”

Abul Nurujjaman, accountant at TAJ Accountants, recommends that businesses trial a full quarterly update using real-time figures now.

He said: “This ‘shadow quarter’ helps expose gaps in digital record-keeping, such as missing receipts or incorrect categorisation, allowing issues to be resolved while the stakes are still low.”

Move away from manual figures

One of the key aims of the changes is to have all the financial information for your business or property portfolio accessible online that can be moved automatically between systems.

Experts are advising businesses to move away from manual data entry now and ensure receipts and expenses are captured digitally as they arise using accounting software such as QuickBooks or Xero.

Holly Walker, tax senior at accountancy firm HB&O, said: “We are inviting some of our clients to enrol early on the test service, so that they can start to understand the new requirements right now. It’s really important that people learn about it early and understand how it works without the pressure of knowing it’s a legal obligation.

“It is going to be quite a big leap for clients who provide manual books and records late in the tax cycle. For these clients, conversations need to be taking place now.”

Define who is responsible

Businesses must explicitly decide whether quarterly updates will be managed directly within the accountancy software they use or handled by their accountant.

Nurujjaman said: “If you work with an agent, your engagement letter should clearly confirm responsibility for MTD submissions to avoid missed deadlines and the points-based penalty system.”

Simplify business banking

MTD reporting can become more complex with every additional bank account or personal transaction mixed into business records, especially if you are a sole trader.

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Nurujjaman suggests that all business spending should be done within a single, dedicated account and feed.

He said: “This significantly reduces reconciliation time in accounting tools and lowers the risk of errors in quarterly summaries.”

Check the HMRC website

HMRC has a range of Making Tax Digital guides that explain how to prepare including what software is needed and the key reporting dates.

A spokesperson said: “We’ve worked extensively with customers, representative bodies and software developers to ensure Making Tax Digital works for small businesses and landlords, helping them prepare for the change.

“We are writing to customers who submitted a 2024/25 tax return and who are due to join MTD in April.”

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