As a small business owner in the UK, staying on top of tax regulations can be a daunting task. With the introduction of Making Tax Digital (MTD) for Income Tax in April 2026, many small businesses and SMEs are left wondering where to start and how to prepare. To help shed some light on this topic, Chris Downing, a representative from Sage, shares his expert advice and insights on MTD for Income Tax.
MTD for Income Tax is part of the UK government’s initiative to make the tax system more efficient and effective. It requires businesses and self-employed individuals to keep digital records of their income and expenses, and submit their tax returns through compatible software. This will replace the traditional method of filing paper tax returns and aims to reduce errors and improve accuracy.
So, where should small business owners start when it comes to MTD for Income Tax? According to Chris Downing, the first step is to understand the requirements and deadlines set by HM Revenue and Customs (HMRC). “MTD for Income Tax will be introduced in April 2026 for businesses with annual turnover above £10,000,” he explains. “This means that if your business falls into this category, you will need to start keeping digital records and submitting your tax returns through compatible software from that date.”
For businesses with annual turnover below £10,000, MTD for Income Tax will not be mandatory but is still encouraged. “Even if your business is not required to comply with MTD for Income Tax, it is still beneficial to adopt digital record keeping and tax filing,” says Downing. “This will not only make your tax processes more efficient, but it will also help you stay organized and on top of your finances.”
The next step is to ensure that your business is using compatible software for MTD for Income Tax. HMRC has a list of approved software providers, and it is important to choose one that best suits your business’s needs. “Choosing the right software is crucial for a smooth transition to MTD for Income Tax,” advises Downing. “Make sure to do your research and select a provider that offers features and support that align with your business’s requirements.”
Once you have chosen your software, it is time to start keeping digital records. This means recording all your income and expenses digitally, using the software provided. According to Downing, this may seem overwhelming at first, but it will ultimately save you time and effort in the long run. “Digital record keeping eliminates the need for manual data entry and reduces the risk of errors,” he explains. “It also allows for real-time tracking of your finances, giving you a better understanding of your business’s financial health.”
As April 2026 approaches, it is important to stay updated on any changes or updates to MTD for Income Tax. HMRC may release new guidelines or requirements, and it is essential to stay informed to ensure compliance. “Keeping up with the latest developments and updates will help you avoid any last-minute surprises and ensure a smooth transition to MTD for Income Tax,” says Downing.
In addition to the technical aspects of MTD for Income Tax, it is also crucial to prepare your business mentally for the change. “MTD for Income Tax may seem like a daunting task, but it is important to remember that it is ultimately for the benefit of your business,” says Downing. “Embracing digital record keeping and tax filing can bring many advantages, such as increased efficiency, accuracy, and better financial management.”
In conclusion, MTD for Income Tax is a significant change in the UK tax system, and small businesses and SMEs must be prepared for its introduction in April 2026. By understanding the requirements, choosing the right software, and adopting digital record keeping, businesses can ensure a smooth transition to MTD for Income Tax. It is also important to stay updated on any changes and to approach the change with a positive mindset. With the right preparation and mindset, MTD for Income Tax can be a beneficial change for small businesses and SMEs in the UK.
