By Deborah Edwards
Chartered Accountant, Director at Harland and qualified business mentor
TLDR (too long didn’t read): What you need to know
Making tax digital for income tax will change how and when you report your income from 2026. It’s not just a compliance shift. It’s an opportunity to stay closer to your numbers, reduce surprises and make more confident decisions.
I’ll be honest, I winced when we started preparing our clients for Making Tax Digital. This scheme has been in the offing since 2015, with plans for sole traders to move to digital, quarterly reporting as early as 2018.
In reality, it proved too ambitious and was pushed back several times, with the focus shifting first to VAT and delays caused by complexity and COVID. In those few years, it’s fair to say that the business landscape has changed and had a lot to contend with.
So when MTD became certain, it felt like yet another burden for our clients, many of whom are already navigating rising costs, tighter margins and ever changing employment practices. Now, on top of everything else, many smaller businesses are being asked to subscribe to accounting software and fundamentally change the way they report their numbers.
Before we get into the bigger picture, it’s worth briefly reminding ourselves what’s actually changing.
What is changing with making tax digital for income tax?
Making tax digital for income tax will require eligible business owners to keep digital records and submit quarterly updates instead of a single annual return.
Making Tax Digital for Income Tax is being introduced in phases. From April 2026, self-employed individuals and landlords with income over £50,000 will need to keep digital records and submit quarterly updates to HMRC, (the first reporting period starting in July 2026) followed by a final end-of-year declaration. From April 2027, the threshold drops to £30,000. In simple terms, that’s moving from one annual submission to a more regular rhythm of reporting throughout the year.
Read our blog article, what is Making Tax Digital, for more information.
Why many small businesses are resisting MTD
For many small businesses, making tax digital feels like added admin, cost and disruption to systems that have worked for years. On the surface, it’s easy to see why this has been met with resistance. It looks like more admin, more cost and more disruption to ways of working that, for many, have been in place for years.
The hidden opportunity behind making tax digital
While making tax digital is a compliance change, it also creates an opportunity to improve how and when business decisions are made. I pride myself in trying to find the silver linings in situations and so stepping back from the compliance side of it, there is a different way to look at this.
For a long time, many small businesses have been making decisions based on hindsight, or worse, not making any decisions at all but just getting carried along with the tide with little conscious business strategy at all. Accounts are prepared well after the year end, tax liabilities arrive after the point decisions could have been influenced, and there is often a reliance on instinct rather than up-to-date financial information. Today’s business landscape just doesn’t have that luxury of wriggle room anymore.
How quarterly reporting can improve decision-making
Quarterly reporting gives business owners more up-to-date financial insight, helping them make better decisions throughout the year. Making Tax Digital nudges a change in that behaviour. If your records are being kept up to date and reviewed on a quarterly basis, you start to see what’s happening in your business while it’s still happening. You have the chance to spot pressure on margins earlier, understand whether pricing is working, and make adjustments before issues become embedded. These are the things we aren’t taught in school.
Making tax digital introduces a rhythm to business finances for those who have not been required to do this before, and with that comes a greater sense of control.
This is one of those moments where something that feels imposed can still be used constructively. The requirement itself may not have been asked for, but the discipline it creates can be genuinely valuable if it’s approached in the right way.
How to prepare for making tax digital in practice
Preparing for making tax digital starts with choosing the right software, building simple routines and understanding your numbers. So, what does “approached in the right way” actually look like in practice? Our simple recommended starting point would be:
- Have a proper conversation with your client manager. Not just about compliance, but about how you currently run your finances and where the pressure points are. This isn’t one-size-fits-all.
- Be open-minded about software. The right system should make your life easier, not harder. There are options, and choosing well at the start makes a big difference. We recommend Xero and QuickBooks. These two systems are well designed for non-financial people. Get support with your accounting systems.
- Learn the basics properly. Understanding how to raise invoices, reconcile your bank and review your numbers will save you time and frustration later. We can support with training to get you comfortable.
- Set a simple monthly routine. Keeping on top of your records in small, regular chunks is far easier than trying to catch up in one go.
- Use the information, don’t just record it. Take a few minutes each month to look at what your numbers are telling you. Are your costs creeping up? Is your pricing holding? Are you making the profit you expected? What actions or decisions do you need to take?
How to get real value from MTD (not just stay compliant)
The real benefit of making tax digital comes from using your financial data regularly to guide decisions, not just to meet deadlines.
The businesses that will get the most out of this shift won’t be the ones who simply do what’s required to stay compliant. They’ll be the ones who use the process as a way of staying closer to their numbers, making clearer decisions and running their business with more confidence.
I did wince at the start, especially seeing the additional financial cost, but having stepped back, there is an opportunity here to move from looking backwards once a year to understanding your business as it evolves.
And that, if embraced, is where the real value sits and in the real world, done well will mean less sleepless nights, more financial certainty and more control over where you are taking your business. Not where your business is taking you.
Ready to move beyond basic accounting?
If you’re new to Harland and would like help with MTD, book a free discovery call to explore how we can support you with values-aligned financial strategy, growth planning to fuel your impact, and advisory support that helps you make confident, well-timed decisions.
About the author
Deborah Edwards
With over 20 years’ experience, Deborah is a Chartered Accountant and Director at Harland. She is also a qualified business mentor, entrepreneur and finance director, specialising in helping purpose-led business owners improve performance through better financial clarity and decision-making.
