With the new tax year approaching, many people in business are starting to prepare for Making Tax Digital (MTD), and for good reason. From April, the way you report your tax to HMRC may change significantly. As its likely you will be affected by MTD in the coming years, especially if you own or run an SME business, taking action now will make the transition far smoother.

Who does MTD apply to?

From April 2026, sole traders and people like landlords with annual income over £50,000 will need to comply with Making Tax Digital for Income Tax. This means:

• Keeping digital accounting records
• Submitting quarterly updates to HMRC using approved software

HMRC estimates that around 900,000 individuals will join MTD in the first phase alone. For many, this will be a big shift from the annual tax return process they’re used to.

Using the right software

MTD requires you to use HMRC-approved accounting software. If you already keep digital records, this may be a small adjustment. If not, it’s an important change that needs planning and we can help you with your choice of software and its application. Choosing the right software can offer benefits beyond compliance, such as:

• Easier day-to-day bookkeeping
• Better information on things like cash flow and debtors
• More accurate records and fewer errors
• Improved financial decision-making

When choosing software, it’s worth looking beyond “MTD compatible” and considering what will genuinely support your business. A simple review of what you need now or may need in the future can ensure you make the right choice, again we can help you with that.

Registering for Making Tax Digital

HMRC will contact you if your income indicates that MTD applies to you. You will not be enrolled automatically.

If you need to register with HMRC you’ll also need to:

• Choose compatible software for your returns
• Ensure everything is set up before your first reporting deadline

Missing registration or leaving it too late could lead to unnecessary stress for you and possible penalties.

Are there exemptions?

Some individuals are automatically exempt, HMRC will usually notify you if this applies. In other cases, exemptions may be available due to specific circumstances, so it’s worth checking whether you’re eligible to apply.

What if your income is below £50,000?

MTD is being introduced in stages:

• 6 April 2026 – income over £50,000
• 6 April 2027 – income over £30,000
• 6 April 2028 – income over £20,000

If you fall below these thresholds, you won’t need to comply yet — but you can choose to join voluntarily if you want to get ahead and spread the learning curve.

Does MTD apply to partnerships?

Not at this stage. However, HMRC has confirmed that business partnerships will be brought into MTD in the future, with details and timelines to be announced later. So if you trade as a partnership then its going to be best to get MTD compliant now.

Need help getting MTD-ready?

For many businesses, the biggest challenges are choosing the right software and understanding what’s required. At Kaizen we can help by:

• Recommending and setting up suitable accounting software
• Handling your MTD registration with HMRC
• Providing training and ongoing support
• Managing quarterly submissions and year-end returns on your behalf

If you’d like support with any part of Making Tax Digital, please get in touch — we’d be happy to help you prepare your submissions with confidence. Please contact us on 01482 772261 or email: info@kaizengroup.uk

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