What will Making Tax Digital for Income Tax mean for small businesses in 2026 and beyond?

"Under the new rules, you'll need to use HMRC recognised software to keep digital financial records, send quarterly updates on income and expenses and complete an annual declaration that confirms your final tax position for the year by the usual 31 January deadline. It's a big change and the biggest shift in personal tax since self assessment was introduced more than 30 years ago."

"MTD for IT will be rolled out in stages. If you're a small business, sole trader or landlord that has an annual income of more than £50,000 then you'll be included from April 2026. It will then be extended to include those earning over £30,000 by April 2027, and anyone turning over more than £20,000 from April 2028. With such a big shift ahead, the coming months will be very important."

Making Tax Digital for Income Tax (MTD for IT) requires millions of small businesses, sole traders and landlords to replace annual, paper-based tax returns with more frequent digital reporting. Taxpayers must use HMRC-recognised software to keep digital financial records, submit quarterly updates on income and expenses, and file an annual declaration confirming the final tax position by 31 January. The rollout is staged: those with annual income over £50,000 join in April 2026, over £30,000 in April 2027, and over £20,000 in April 2028. The reform aims to modernise the tax system, reduce administrative burden and align reporting with digital business tools. Preparations and habit changes are advised.

Read at Business Matters