Are You Ready for Making Tax Digital (MTD)?

By Kate | March 2, 2026

Making Tax Digital (MTD) is the most significant change to the Self Assessment regime since the introduction of electronic filing in 2000. It represents a fundamental shift from annual reporting to digital, quarterly submissions.

As Accounts Partner at Mercian Accountants, Jake Holdroyd is already working with clients to prepare for these changes. Below, he outlines who will be affected, what will change, and how to ensure you are ready.

From April 2026, many self-employed individuals and landlords will move from submitting one annual tax return to providing four quarterly updates, followed by a final declaration at the end of the tax year. If you fall within the income thresholds, preparation should begin well in advance of your start date.

Table of Contents

Who Will Be Affected?

You will be required to comply with MTD for Income Tax if your total gross income from self-employment and property combined exceeds:

• £50,000 from April 2026
• £30,000 from April 2027

These thresholds are based on gross income, not profit. HMRC will determine whether you are required to join using information from previously submitted tax returns.

Those not currently affected include:

• Limited companies
• Limited Liability Partnerships
• General partnerships at present

Further phases are expected in future.

How Does the System Change?

Previous System

Tax year: 6 April to 5 April
One annual Self Assessment return
Filing deadline: 31 January following the end of the tax year

This meant tax could be payable up to nine months after the year-end, effectively up to 21 months after profits were earned.

New MTD System

Tax year remains 6 April to 5 April
Four quarterly updates due
- 7 August
- 7 November
- 7 February
- 7 May
Final declaration due: 31 January

It is important to note that quarterly updates are reporting submissions only. They are not tax payment deadlines.

What Are the Compliance Requirements?

To remain compliant under MTD, you must:

Maintain digital accounting records
Use HMRC recognised MTD compatible software
Keep records up to date throughout the year
Submit four quarterly updates
Submit a final declaration confirming taxable profit

Paper records and manual summaries will no longer meet HMRC requirements.

HMRC will operate a points-based penalty system for late submissions, making timely compliance essential.

What Happens If You Do Nothing?

Leaving preparation until the last minute can result in:

Rushed software decisions
Inaccurate record keeping
Increased risk of HMRC penalties
Greater administrative burden
Unnecessary stress

Early preparation enables structured implementation, proper training, and a smooth transition.

The Strategic Benefits of MTD

Although reporting frequency increases, MTD also creates an opportunity.

Greater visibility of your tax position throughout the year
Improved cash flow management
Earlier identification of issues
More accurate forecasting
Better informed business decisions

Rather than reviewing performance once a year, you move towards real-time financial awareness. For many business owners, this results in stronger financial control.

Can I Manage MTD Myself?

Many individuals have successfully filed their own tax returns for years and may wish to continue doing so under MTD. This remains possible.

However, you should consider:

You will need MTD compliant accounting software, usually via a monthly subscription
Receipt capture software may also be required
All receipts must be digitally recorded
Bank transactions must be reconciled regularly
Expenses must be categorised accurately

The previous approach of summarising annual totals will no longer be sufficient. Detailed digital records will be required throughout the year.

How Mercian Accountants Can Help

At Mercian Accountants, our objective is to make the transition to MTD straightforward and remove the administrative burden from you.

We simply ask that you:

Connect to our secure open banking platform, allowing us to extract bank data directly
Download our recommended receipt capture software, with full training provided
Provide receipts digitally as they are incurred

We manage the bookkeeping, quarterly submissions, compliance monitoring and final declaration. You gain clarity, confidence and peace of mind.

Next Steps

With April 2026 approaching, now is the time to prepare.

We are offering a free 30-minute MTD readiness consultation, which includes:

A personalised MTD action plan
Clear guidance on your compliance timeline
Practical advice tailored to your circumstances

Availability is limited as implementation dates draw closer. If you’d like to book your MTD readiness consultation or seek any assistance or advice, please don’t hesitate to contact us at hello@mercianaccountants.co.uk or via our contact page.