Making Tax Digital: Four steps for preparing for major change to business accounting - Anne McCoubrey

In doing this, companies will have the time to put into practice what will become a legal requirement.

The update is part of the Government’s 10-year strategy to improve the tax system through removing manual processing and migrating all businesses to digital filing. The results should be to reduce errors and retain all records digitally. It will also support HMRC’s objective to become “one of the most digitally advanced tax administrations in the world.”

For now, from April 2026, all self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD compatible software.

Those with an income of between £30,000 and up to £50,000 will need to do this from April 2027 and the details for businesses with a turnover below £30,000 are still being reviewed.

In practice, this means that businesses will have to invest in, or gain access to, compatible software that will connect directly with HMRC. In addition, many will require upskilling to evolve their accounting practices from manual to digital.

Evidence from research and analysis by Yonder, independent analysts for HMRC, has found that 28 per cent of respondents incorrectly considered their business ineligible; just over half (51 per cent) were aware of what MTD meant; 20 per cent confirmed they will continue to rely on paper; and 46 per cent could not see any benefits to the change to the system.

The most sensible solution is to implement the necessary software or access the help and advice required as soon as possible. Rather than making tax difficult, business owners and landlords can follow four simple steps:

1. Advice

Access advice on the new system and how it will work. Identifying the right software and ensuring that it is compatible and compliant is essential. The initial outlay may be a challenge for some business owners, however once it is in place, any further costs should be negligible.

2. Training

Getting the right expert training to ensure that you are filing and saving digital documents correctly will avoid potential penalties. Trialing this in the run up to the changes will also ensure the business is ready when MTD is enforced.

3. Talk to the experts

Relying on a chartered accountant will save time, money and worry. Still, the need to better understand the process is not without its merits, particularly as the details change along the process.

4. Access data and expertise

Once the systems are in place, use the data and expertise of a chartered accountancy practice to support your business and drive your organisation to meet with objectives and become the best it can be.

Like most updates from HMRC, there will be changes along the way, and keeping up to date with all requirements is key. The main point being that making the necessary changes now will only support the transition when it becomes mandatory.

Anne McCoubrey is tax manager for Walker & Sutcliffe chartered accountants