Making Tax Digital for Income Tax: What April 2026 Means for Small Businesses

From April 2026, one of the biggest changes to the UK tax system in recent years will begin to take effect.

Making Tax Digital for Income Tax (MTD ITSA) is set to change how many small business owners and landlords record and report their income. While the aim is to make tax more efficient and reduce errors, it will also introduce new responsibilities and a shift in day-to-day financial habits.

In this blog, we’ll explain what MTD means, who it affects, and what will actually change in practice.

What Is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) is part of HMRC’s move towards a fully digital tax system.

MTD for Income Tax applies to:

• Self-employed individuals

• Landlords

From April 2026, it will be mandatory for those with annual business or property income over £50,000. Those earning over £30,000 will follow from April 2027.

Under MTD, instead of submitting one Self Assessment tax return per year, you’ll move to a system of digital record-keeping and more regular reporting.

The Key Changes at a Glance

The biggest shift is how and when you report your income to HMRC.

Instead of a single annual submission, you’ll be required to:

• Keep digital records of income and expenses

• Submit quarterly updates to HMRC

• Complete an end-of-year final declaration

While this spreads the workload across the year, it also means you’ll need to stay on top of your bookkeeping more consistently.

Quarterly Reporting Explained

One of the most talked-about changes is the move to quarterly reporting.

Rather than filing once a year, you’ll submit updates roughly every three months. These updates provide HMRC with a snapshot of your income and expenses throughout the year.

It’s important to note that quarterly submissions are not full tax returns. They won’t finalise your tax bill, but they will give a running estimate of your position.

At the end of the tax year, you’ll still complete a final declaration to confirm your total income, claim reliefs, and calculate your final tax liability.

What Will Change Day-to-Day?

For many small business owners, the biggest impact of MTD will be in day-to-day habits.

Keeping records up to date will no longer be optional or something to “catch up on later.” You’ll need to regularly record income and expenses using MTD-compatible software.

Spreadsheets and paper records alone will no longer meet the requirements unless they are linked to approved software. This means many businesses will need to adopt or upgrade their accounting systems.

You’ll also need to be more aware of deadlines throughout the year, rather than focusing solely on January.

The Benefits (Yes, There Are Some)

While MTD does introduce more frequent reporting, it also offers some advantages.

Having up-to-date records means you’ll have a clearer view of your business performance throughout the year. This can help with decision-making, budgeting, and avoiding unexpected tax bills.

Regular reporting can also reduce the last-minute stress that often comes with Self Assessment, as much of the work will already be done.

Preparing for April 2026

Start by reviewing how you currently keep your records. If you’re relying on spreadsheets or paper, now is the time to explore digital options such as Xero or other MTD-compatible software.

It’s also worth getting into the habit of updating your records monthly, rather than leaving everything until year-end. This small change now will make quarterly reporting far easier later.

Understanding whether MTD applies to you based on your income is another key step, particularly if your earnings are close to the £50,000 threshold.

How BCT Accountants Can Help

Making Tax Digital represents a significant shift, but you don’t have to navigate it alone.

At BCT Accountants, we help small and medium-sized businesses prepare for MTD by setting up the right systems, supporting digital record-keeping, and managing submissions on your behalf.

We can also provide training and ongoing support, so you feel confident and in control — rather than overwhelmed by new requirements.

Getting Ready for a More Digital Future

Making Tax Digital for Income Tax is changing how businesses interact with HMRC, moving from annual reporting to a more regular, real-time approach.

With the right preparation, it doesn’t have to be complicated. In fact, it can lead to better financial visibility and fewer surprises.

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If you’d like help preparing for MTD or want to understand how it will affect your business, get in touch with Catherine on 01423 431 889 or email office@bctaccountants.co.uk to book your free consultation.

All information is correct for the 2025/26 tax year.