Making Tax Digital (MTD) for Income Tax is the biggest compliance change in years. From April 2026, it becomes mandatory for sole traders and landlords with income over £50,000.
At Brightson Accounting, we're helping businesses across Wolverhampton and the West Midlands prepare for MTD right now. Many are not yet ready — but the deadline is approaching fast.
- Applies to sole traders and landlords with income over £50,000
- Mandatory from April 2026 (voluntary before then)
- Requires quarterly digital submissions to HMRC
- Must use MTD-compatible software
- Annual Self Assessment still required (final declaration)
What is Making Tax Digital (MTD)?
MTD is HMRC's plan to digitalize the entire tax system. It replaces annual tax returns with quarterly digital updates.
Already Live:
- MTD for VAT (mandatory since April 2019 for VAT-registered businesses)
Coming April 2026:
- MTD for Income Tax (sole traders and landlords)
Future:
- MTD for Corporation Tax (date not yet confirmed)
Who Must Use MTD for Income Tax?
From April 2026, MTD is mandatory if you are:
- A sole trader with business income over £50,000
- A landlord with property income over £50,000
- Both — combined income over £50,000
Exemptions:
- Income under £50,000 (MTD is voluntary)
- Limited companies (different rules apply)
- Partnerships (separate MTD rules coming)
Even if MTD doesn't apply to you yet, many businesses are adopting it voluntarily to future-proof their systems.
How MTD for Income Tax Works
Quarterly Submissions
Instead of one annual Self Assessment, you submit 4 quarterly updates to HMRC:
| Quarter | Period | Deadline |
|---|---|---|
| Q1 | 6 Apr - 5 Jul | 5 August |
| Q2 | 6 Jul - 5 Oct | 5 November |
| Q3 | 6 Oct - 5 Jan | 5 February |
| Q4 | 6 Jan - 5 Apr | 5 May |
Final Declaration
By 31 January following the tax year, you must submit a final declaration. This is similar to your current Self Assessment return.
So you'll submit 5 times per year instead of once:
- 4 quarterly updates
- 1 final declaration
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👉 Try the Corporation Tax CalculatorDigital Software is Mandatory
You cannot submit MTD updates manually. You must use MTD-compatible software.
Popular MTD Software:
- Xero — Cloud-based, comprehensive
- QuickBooks — User-friendly, small business focused
- FreeAgent — Designed for freelancers
- Sage Business Cloud — Traditional option
All of these connect directly to HMRC and submit quarterly updates automatically.
Spreadsheets: You can use bridging software to submit from Excel, but dedicated software is more reliable.
Digital Record Keeping Requirements
Under MTD, you must keep digital records of:
- All business income
- All business expenses
- VAT records (if VAT registered)
- Assets and liabilities
Paper receipts alone are not sufficient — you must digitize them (photo/scan).
Full guide: Record Keeping Requirements for UK Businesses
How to Prepare for MTD
Step 1: Check If It Applies to You
Calculate your income for the current tax year. If it's over £50,000 (or close), MTD will apply from April 2026.
Step 2: Choose MTD Software
Research MTD-compatible software and choose one that fits your business. Most offer free trials.
Step 3: Digitize Your Records
Start keeping digital records now. Enter all income and expenses into your chosen software.
Step 4: Set Up Bank Feeds
Connect your business bank account to the software. This automates much of the data entry.
Step 5: Practice Quarterly Updates
Even before MTD is mandatory, practice submitting quarterly summaries. This prepares you for the new routine.
Step 6: Work with an Accountant
At Brightson Accounting, we help West Midlands businesses transition to MTD smoothly. We handle software setup, training, and quarterly submissions.
Common MTD Mistakes to Avoid
1. Waiting Until April 2026
Don't leave it until the last minute. Setting up software and digitizing records takes time.
2. Using Non-MTD Software
Check your software is MTD-compatible. Not all accounting tools are approved by HMRC.
3. Missing Quarterly Deadlines
Set calendar reminders for each quarterly deadline. Missing them = penalties.
4. Poor Record Keeping
MTD requires accurate digital records. If your bookkeeping is messy, quarterly submissions will be stressful.
Full guide: Bookkeeping Basics for Compliance
Penalties for Non-Compliance
If you don't comply with MTD:
- Late quarterly submissions: Penalties apply (exact amounts TBC by HMRC)
- Late final declaration: Same penalties as current Self Assessment (£100+)
- Incorrect data: HMRC may investigate and charge penalties for careless errors
Full guide: HMRC Penalties Explained: How to Avoid Them
Benefits of MTD
While MTD requires more frequent submissions, it has benefits:
- Better cash flow planning — you know your tax position quarterly, not annually
- Fewer errors — digital submissions reduce manual mistakes
- Less year-end stress — work is spread across the year
- Real-time tax view — you always know how much tax you owe
How Brightson Accounting Can Help
We help businesses across Wolverhampton and the West Midlands with:
- MTD software setup and training
- Quarterly submission management (we do it for you)
- Digital record-keeping systems
- Final declaration preparation
- HMRC enquiry support
MTD doesn't have to be complicated. With the right software and support, quarterly submissions become routine.
Want to stay compliant and reduce your corporation tax at the same time? Speak to an accountant today.
🚀 Ready to stay compliant and reduce your tax bill?
We help businesses across Wolverhampton and the West Midlands:
- Stay compliant with HMRC
- Reduce tax legally
- Avoid penalties and investigations