What do I Need to Know About MTD?

Big changes are coming! If you're self-employed or own rental property, HMRC’s Making Tax Digital (MTD) changes are going to affect how you manage your taxes. Starting on 6 April 2026, the way you report income will shift from annual returns to quarterly updates. This is less than 6 months away!

As a Bromley-based business accountant I’ll be ideally placed to help you through these changes.

What’s Changing?

Instead of one yearly tax return, you’ll now submit quarterly summaries of income and expenses. At the end of the year, you’ll do a final declaration that resembles the traditional return.

You’ll need to use approved accounting software—HMRC won’t be offering a free tool.

This is the biggest change since the introduction of self assessment in 1997. So pay attention!

How the New Reporting Works

You can opt for calendar quarters (e.g. April–June) to keep things simple. After each quarter, you’ll have 30 days plus 7 to submit your update. If you have both business and rental income, you’ll need to submit separate reports—up to nine submissions a year.

Corrections

You can correct mistakes in the next update. Their current focus is on accuracy, not punishment.

Who Will Be Affected First?

It depends on your income:

• £50k+ turnover: From April 2026

• £30k+ turnover: From April 2027

• £20k+ turnover: From April 2028

HMRC will use your latest tax return to decide. If you’re newly self-employed, you likely won’t be affected until 2028.

Why Is This Happening?

HMRC estimates £8 billion is lost annually due to taxpayer errors. They believe digital reporting will reduce this. But it does mean extra costs for small businesses—including software and possibly higher accounting fees.

Still Some Unknowns

Even software providers don’t yet know how the final year-end submission will work. Accountants are keeping a close eye on updates and will be ready to guide clients through the changes.

What Stays the Same?

• Tax liability – the amount of tax you pay and the tax payment deadlines remain the same as before

• The 2024-25 tax year – an annual return and submission deadline of 31 Jan 2026

• The 2025-26 tax year – an annual return and submission deadline of 31 Jan 2026. However, the quarterly reporting will be running side by side!

Will Alongside Accounting Help?

Clients of Alongside Accounting will be supported by:

1. Being informed of the changes and key dates

2. Getting you set up with the right software and processes for digital record keeping

3. Exploring other options, such as converting to a limited company

What are the Benefits of MTD?

Yes, this is a difficult sell:

• Improved record keeping because of the regular quarterly deadlines. It's like being made to go to the gym. At 5am. On the weekend.
  

• More accountant contact throughout the year can you proactively manage your business. How you actually feel about this could go one of two ways.
  

• Better tax forecast because your accounts will be up to date throughout the year. This will improve your cash flow management.

What You Should Do Now

1. Check your rollout date using HMRC’s tool

2. Choose your software—Xero is a strong option, especially their new “Simple” plan.

3. Consider joining the pilot if you want to get ahead (though it’s limited for now).

Can You Avoid Making Tax Digital?

Not easily. You could:

• Go limited or form a partnership (though these may be included soon)

• Keep your turnover below £20k

• Apply for an exemption if you’re digitally excluded or have a disability

Final Thought

MTD is coming whether we like it or not. If you're based in Bromley and want help preparing, choosing software, or understanding your obligations, feel free to reach out. I'm here to make it less painful.