UK tax is changing for self-employed business owners and landlords. The thought of Making Tax Digital (MTD) may seem overwhelming. But before you panic about new regulations, constant reporting, and technological upheaval, take a deep breath—MTD might not be as bad as it seems.

In this blog, we’ll break down:

• What is Making Tax Digital?
• Who does Making Tax Digital affect?
• When is it happening?
• 5 reasons why it might actually benefit your business .

What is Making Tax Digital?

Making Tax Digital (MTD) is a government initiative designed to make the UK’s tax system more efficient, accurate, and accessible. The goal? To reduce errors, streamline tax reporting, and encourage businesses to go digital with their financial record-keeping.

Instead of filing a single tax return once a year, businesses will need to keep digital records and submit updates to HMRC every quarter using MTD-compatible software. This means real-time tax tracking rather than the usual last-minute scramble before deadlines.

Who Does Making Tax Digital Affect and When?

MTD isn’t new. HMRC have been rolling out MTD in phases, gradually bringing more businesses into the system. MTD for VAT was introduced in April 2019 for VAT-registered businesses earning over £85,000 and extended to all VAT-registered businesses in April 2022.

The next phase of MTD will be MTD for Income Tax Self-Assessment (MTD for ITSA) and will be in place from April 2026 for self-employed individuals and landlords with an income over £50,000 (income not, profit). Those earning over £30,000 will join in April 2027.

MTD for Corporation Tax is also currently under consultation, but there is no agreed implementation agreed at this time.

Why Making Tax Digital May Not Be a Bad Thing

Whilst many see the additional reporting requirements of MTD as a burden and extra layer of cost and complexity, consider the positive impact of quarterly reporting on you and your business. Here are five reasons why MTD might be more of an opportunity than a headache:

1. Better Financial Visibility

One of the biggest challenges for self-employed business owners is staying on top of their finances. With quarterly tax reporting, MTD forces you to keep up-to-date digital records, meaning you’ll always have a clear picture of your income, expenses, and tax obligations. No more nasty surprises when your tax bill arrives—just better cash flow management and informed decision-making.

2. Less Stress at Tax Time

Do you dread tax season?  Do you leave everything until the last minute and struggle to pull together a year’s worth of paperwork? MTD reduces this stress by breaking tax reporting into smaller, manageable updates throughout t the year. This means no more year-end panic and fewer errors caused by rushed calculations.

3. Increased Efficiency and Accuracy

MTD requires businesses to use accounting software that connects directly with HMRC. This software automates calculations, reduces human error, and helps ensure compliance. If you’re still using spreadsheets or a shoebox full of receipts, MTD could be the push you need to embrace a more efficient way of managing your business finances.

4. More Control Over Your Tax Liabilities

Because MTD involves submitting tax data regularly, you’ll get a much clearer idea of what you owe throughout the year. This means no unexpected tax bills and the ability to plan ahead. Some accounting software even estimates your tax liability in real-time, allowing you to save accordingly and avoid financial strain.

5. Encourages Growth and Professionalism

Larger self-employed businesses and landlords looking to scale up will benefit from a more structured, professional approach to financial management. Keeping digital records and using cloud-based accounting software makes it easier to track profits, apply for funding, and make data-driven business decisions. MTD essentially encourages business owners to adopt best practices that can help them grow.

How to Prepare for MTD

If you’re affected by MTD, the best approach is to get ahead of the game. Here’s how:

• Invest in MTD-compatible software – Popular options include Xero, QuickBooks, and FreeAgent, but there are plenty of alternatives depending on your needs and budget.
• Get into the habit of digital record-keeping – Start keeping track of your income and expenses digitally now so the transition is smoother when MTD becomes mandatory.
• Seek professional support – If you’re unsure about how MTD will affect you, an accountant can help ensure you’re compliant while also making the most of the benefits.

Final Thoughts

Making Tax Digital is coming whether we like it or not, but rather than seeing it as another administrative burden, self-employed businesses and landlords can use it as an opportunity to improve their financial management.

By embracing MTD now, you can reduce stress, improve accuracy, and gain better control over your tax obligations—while setting your business up for future success.

If you’re still unsure how MTD will affect you, now is the time to seek advice and get prepared.

At Beansprout, we specialise in helping self-employed professionals and landlords navigate the complexities of MTD, ensuring a seamless and stress-free transition. Don’t wait until the last minute – contact Beansprout today and let us help you take control of your business finances with confidence!