Making Tax Digital for Income Tax - A Shift Towards Clarity and Growth

Change is on the horizon for self-employed individuals and landlords. You might have already heard about MTD for IT - but what exactly does that mean?

Simply - it stands for Making Tax Digital for Income Tax.

It introduces a new way of managing income tax. Requiring Quarterly Submissions of income and expense summaries within a month of each quarter-end. These submissions build towards an End of Period Statement where adjustments and allowances can be made. Ultimately, a Final Declaration (replacing the traditional Self Assessment) will then bring together all your income sources to determine your tax liability to be submitted and paid as usual (January 31st deadline).

fographic illustrating the MTD for Income Tax submission process. On the left, four staggered boxes represent quarterly submissions, labelled 'Quarter 1', 'Quarter 2', 'Quarter 3', and 'Quarter 4'. Each quarter is linked to an icon of a document with lines, symbolising digital record-keeping and submission. Below the quarters, a note highlights that the data is cumulative, covering income, expenses, and profit. An arrow points from the quarterly submissions to a larger document on the right, labelled 'FINAL', indicating the final end-of-year submission after adjustments. The word 'Adjustments' is written vertically alongside the arrow, showing that necessary corrections can be made before the final report is sent. — Each Quarter you will digitally submit records - culminating in a final submission that replaces Self Assessment.

Who does this apply to?

Eventually - all self-employed individuals and landlords will be included. The transition will be phased, based on turnover - and that means the amount coming into your business, not the profit after expenses.

April 2026 - Those with £50,000+ turnover
April 2027 - Those with £30,000+ turnover
April 2028 - Those with £20,000+ turnover

HMRC have been working towards this for over 10 years - it started with MTD for VAT, which rolled out between 2018 and 2022.

A person feeling very positive about their financial and business prospects because they are prepared for Making Tax Digital for Income Tax and have their digital records ready because they have an excellent bookkeeper!

Many thought MTD for IT would disappear like other government initiatives, but let me tell you - this one is here to stay. And honestly? I’m glad!

This is a huge opportunity for millions of business owners to get a better grip on their finances as they happen. It helps to be able to answer these critical questions...

What profit have you actually made this month?
How well did your marketing investment affect your sales?
Can you afford to hire a new team member?
How much cash do you need right now?

Traditionally, self-assessments have been completed months after transactions occur - sometimes even nine months after the financial year ends. That’s a long time to be in the dark about how much you owe. And when the tax bill finally lands? It can be a real shock.

The stress of not knowing - of having no time to plan for how to pay - can be a huge burden. Some even choose to take fines rather than deal with it.

How do we avoid this stress?

Easy! Simply by knowing our numbers.

Having clarity on how much each area of your business costs and how much revenue has come in means you can make confident decisions. But here’s the thing - MTD for IT isn’t really about reporting. It’s about keeping great digital records of all transactions - Bookkeeping!

Bookkeeping - The Foundation of Your Business

A book with colourful stories to represent that bookkeeping can bring numbers to life and help a business to prosper.

Bookkeeping. What a funny name for what we do now - my seven-year-old still thinks I look after storybooks all day! And in a way, I do. I take all that data and turn it into the story of the business. It’s a map to help business owners navigate their journey.

Illustration representing the decision-making process in bookkeeping and MTD (Making Tax Digital). A person sits on a suitcase, holding a large map with a location pin above it, symbolising the need for direction and planning. To the right, a signpost with multiple arrows represents different bookkeeping choices, such as software selection, tax compliance, and workflow decisions. A dotted path winds from the signpost, passing a question mark icon (indicating uncertainty) and leading to two possible outcomes: one marked with a cross (representing errors or non-compliance) and the other with a checkmark (representing successful tax submissions and accurate records). The stepping-stone path suggests the journey towards streamlined financial management under MTD. — Where will your navigator take you?

Maybe "bookkeeper" isn’t even the right word anymore. Navigator? Pathfinder? Wayfinder? For numbers... I am "The Numbers Navigator"!

We take heaps of messy information (sometimes in a shoe box!), sort them into order, and arrange them into something useful. That final step? Crafting it into the story of where you’ve been - and where you’re heading.

The Time to Prepare is Now

When MTD for IT begins, there won’t be a grace period. The grace period is now.

From April 2025, business owners should start preparing. Why?

No penalties yet - a perfect time to test systems
Early adoption = smoother transition
Avoid the 2026 deadline scramble

As we get closer to April 2026, accountants and bookkeepers are going to get a flood of last-minute enquiries. Lots of people will realise too late that they need help - and not everyone will be able to take on new clients at that point. Get your systems in place now, while there’s still time and headspace to do it properly.

How Do You Keep Digital Records?

Once upon a time, bookkeeping was done in actual books. Ledgers. Then came the calculator, then Excel. Now? We have cloud accounting software, receipt capture, and digital tools like email and WhatsApp.

The goal is to bring all the elements together into a streamlined, mapped-out digital workflow:

Invoices are issued and emailed directly from your accounting software
Receipts are captured on the go and uploaded instantly via mobile (or even WhatsApp)
Transactions are categorised and reviewed for accuracy
Reports are generated within the system and submitted to HMRC seamlessly

No broken chain. No more downloading everything into Excel and scribbling on paper. Nothing breaks the digital link.

And while this all sounds complicated - it’s not at all when we work together.

I supervise the process, validate the documents, and make sure the right numbers are in the right places. All you need to do - send the information as it happens? Touch it once - and be done. Then sit back and marvel at the insights it unlocks.

Snap it.... App it... Email it

Businesses operate in the NOW. Not in a year’s time. They need real-time data. I know that feels challenging. So work backwards. Get yourself set for quarterly, then work on monthly, possibly even weekly bookkeeping. Or go all out and make the change today! Your bookkeeper will thank you and your business will too!

Software is Our Friend

There are so many solutions ready to roll out from April. And they don’t have to be expensive. For the monthly price of a coffee (okay, maybe not a Chichester coffee!), you can access all the tools you need.

I love Xero - it’s my second home most days. I even use it for my personal/home expenses as I work with a financial advisor to get our family’s finances in order. Knowing the numbers matters and Xero makes it easy to manage.

I also regularly use FreeAgent - especially since it’s free with NatWest, Mettle, RBS, and Ulster business accounts. Both are fantastic entry-level solutions that can scale as you grow.

The list is growing for options that connect directly to HMRC and it's always a case of figuring out the best fit for you and your business.

What Happens Next?

Soon, you’ll be getting one of those lovely brown envelopes (we all love those, right?).

It’ll tell you if you’re in the first wave.

But let’s not wait.

Don't wait for HMRC to tell you what to do - take the benefits now.

A smiling picture of Hannah. She has shoulder-length curly brown hair, is wearing a navy blue top with a white botanical pattern and a silver pendant necklace. She has a warm and approachable expression, set against a simple white background. The image reflects her role as a knowledgeable and friendly UK-based bookkeeper, helping businesses stay organised and on top of their finances while balancing work and family life.

Getting into a monthly routine of checking receipts and invoices makes it so much easier - you’ll actually remember what each one was for, and you won’t miss out on claiming them.

There are brilliant tools to make it painless. And some lovely bookkeepers (hi!) who would be happy to help get you set up for success.

The Bottom Line

MTD for Income Tax isn’t just about compliance - it’s about empowerment. It ensures businesses operate proactively instead of reactively. It reduces stress, improves decision-making, and ultimately creates a healthier financial foundation for business growth.

Clarity in your numbers = Confidence in your decisions.

Don’t wait for that brown envelope from HMRC. Start now and set yourself up for success before the 2026 deadline. I'd be happy to help get you set-up and ready for the most financially informed year yet.