MTD for 2026: A Practical Guide for Busy Business Owners and Landlords

Ashish Paudel
Nov 3
3 min read

From 6 April 2026, many sole traders and landlords must keep digital records and send quarterly updates to HMRC using recognized software. Start now, keep it simple, and you’ll save stress (and penalties) later.

Why Has HMRC Introduced MTD and Why Now?

Making Tax Digital (MTD) aims to update UK tax compliance, minimize errors and negligence, and provide taxpayers with a clearer, real-time view of their finances. Supported by successful VAT trials, it has aided in recovering revenue lost due to mistakes or evasion.

This government initiative represents a long-term commitment, with a phased rollout for Income Tax beginning in April 2026. Therefore, it's crucial to get ready for this transition sooner rather than later.

Who’s Affected and When?

From 6 April 2026: Sole traders and landlords with income above £50,000 must comply.
From 6 April 2027: Threshold lowers to £30,000.
The government plans a further reduction to £20,000 in 2028.
You’ll need to send quarterly updates, typically due on 7 May, 7 August, 7 November, and 7 February, covering the previous quarter.

Can You Keep Your Own Records?

Absolutely—if you use HMRC-recognised software or spreadsheets with bridging software that links digitally without copy-pasting.

Popular, user-friendly options include:

Xero: Robust accounting features, excellent bank feeds, and wide app integration.
QuickBooks Online: Great invoicing and payroll capabilities.
FreeAgent: Simplified platform often provided free by UK business bank accounts, ideal for freelancers and landlords.
Setup requires roughly half a day initially, and most users spend 30–60 minutes weekly keeping up. Alternatively, you can share this with your bookkeeper.

What Will It Cost?

Software subscriptions: Usually between £0 and £40+ monthly, depending on features and promotions.
DIY with accountant check-ins: Expect roughly £200–£400 per quarter for periodic reviews and advice.
Outsourced bookkeeping: Typically runs from £100 to £400+ per month, depending on workload.
Year-end filing fees remain similar but are easier to handle with neatly maintained quarterly records. Always ask accountants for clear, fixed-fee pricing to avoid surprises.

What Not to Do After April 2026

Stop using shoeboxes filled with paper receipts or standalone spreadsheets without digital links.
Avoid copying and pasting data between systems—digital linking is mandatory.
Don’t miss quarterly filing deadlines, as missing them can trigger penalties. Set reminders now.

Risks of Non-Compliance

Missing deadlines can earn you points, leading to £200 fines and escalating penalties. Late tax payments also attract fines, and poor record-keeping can cost up to £3,000 in penalties.

How to Be Proactive: A Simple 5-Step Plan

Choose your software path: All-in cloud accounting.
Link your bank accounts and adapt to cashless payments where possible.
Reconcile bank statements weekly, snap and tag receipts promptly.
Perform quarterly mini closes to check creditors, debtors, and balances before reporting.
Schedule light quarterly reviews with your accountant to catch issues early.

Will MTD Scare Businesses Away?

No. The government’s repeated commitments and positive VAT pilot outcomes show MTD is here to stay. Early adoption will future-proof your business and offer a smoother, more transparent tax compliance journey.

What to Expect from Your Accountant

Setup and onboarding fees: £150–£500
Quarterly reviews: £200–£400 per quarter for clients with straightforward needs
Full bookkeeping: £100–£400+ monthly for more complex work
Training sessions: Often offered as free group clinics or tailored 2–3-hour workshops

Ask your accountant for fixed-fee packages based on the scope of your needs.

By starting early, using suitable software like Xero or FreeAgent, and maintaining tidy digital records, you’ll turn MTD compliance into a manageable process—avoiding penalties and gaining real-time financial clarity.

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