Making Tax Digital: what it means for your business

Making Tax Digital (MTD) is reshaping the UK tax system. HM Revenue & Customs is introducing digital reporting in phases across different taxes, with Income Tax now becoming part of the programme.

At its core, MTD is changing how financial information is recorded and shared. Instead of relying on a single annual submission, businesses and landlords within scope will need to maintain digital records and provide updates to HMRC throughout the year using compatible software.

How Making Tax Digital changes tax reporting

MTD introduces a move away from annual, retrospective reporting towards ongoing digital record-keeping.

In practice, this means:

keeping digital records of income and expenses

using software that is compatible with Making Tax Digital

submitting regular updates to HMRC during the tax year

completing a final year-end submission through the MTD system

This changes the rhythm of accounting. Instead of reviewing everything once a year, financial information needs to be maintained and updated continuously. For many businesses, this brings greater visibility and control over performance throughout the year.

Who needs to comply with MTD?

Making Tax Digital for Income Tax applies to individuals who receive income from:

self-employment

property rental

a combination of both

When will MTD apply?

The rollout is being introduced in stages based on income level:

From 6 April 2026 – if your qualifying income is more than £50,000 (based on the 2024/25 tax year)

From 6 April 2027 – if your qualifying income is more than £30,000 (based on the 2025/26 tax year)

From 6 April 2028 – if your qualifying income is more than £20,000 (based on the 2026/27 tax year)

A key point is how HMRC defines income for these thresholds.

MTD is based on qualifying income, meaning total gross income before expenses or tax deductions. It is the turnover figure that determines whether you fall within scope.

What you will need to do under MTD

If you are within the scope of the rules, you or your accountant will need to:

maintain digital records of income and expenses

use MTD-compatible software

submit quarterly updates to HMRC

submit a final year-end declaration

This results in five submissions per tax year in total.

How MTD affects the way you run your finances

One of the most significant changes under MTD is the removal of tax as an annual task.

Instead, financial management becomes an ongoing process. Records must be accurate throughout the year, not just at year-end.

For business owners, this means:

more consistent bookkeeping

fewer year-end surprises

better visibility of tax position during the year

a stronger link between day-to-day activity and financial reporting

Key points to be aware of

As businesses prepare for Making Tax Digital, there are a few areas that are worth paying close attention to. These are not necessarily problems, but they are points where extra clarity and planning can make the transition significantly smoother.

Ensuring you correctly determine whether your qualifying income exceeds the HMRC threshold

Clearly distinguishing between turnover and profit when assessing your position under MTD rules

Selecting software that is fully compatible with Making Tax Digital requirements from the outset

Allowing sufficient time to prepare ahead of your mandatory start date

Adapting to a more frequent reporting cycle compared to the traditional annual tax return

Preparing for Making Tax Digital

Understand whether MTD applies to you

Review your current record-keeping

Choose suitable software

Prepare for ongoing reporting

Maintain consistency throughout the year

How J. Dauman & Co. supports you through MTD

At J. Dauman & Co., we help self-employed individuals and landlords prepare for Making Tax Digital with confidence.

assessing whether MTD applies

reviewing qualifying income

implementing digital record-keeping

choosing and setting up software

managing quarterly and year-end reporting

ensuring ongoing HMRC compliance