Making Tax Digital enters a new phase in 2026 as HMRC pushes more sole traders into digital record-keeping

By Elliot Wright, Senior Accountant at MM Business and Tax Consultancy

From 6 April 2026, Making Tax Digital for Income Tax moves from policy ambition to day-to-day reality for a much wider group of taxpayers, with sole traders and landlords earning over £50,000 now expected to keep digital records and submit quarterly updates to HMRC. For many businesses, this is the most consequential change to the compliance landscape in years, and it will affect how owners at every stage of growth manage their books, their deadlines and their relationship with HMRC.

At MM Business and Tax Consultancy, we are already seeing clients shift from asking whether MTD matters to asking how quickly they can adapt without disrupting cash flow, payroll or management reporting. That is the right question to ask, because the technical requirements are only part of the story; the bigger issue is operational discipline. In my view, the businesses that treat MTD as a digital housekeeping exercise will benefit most, while those that treat it as another filing deadline will feel the burden much more sharply.

Why 2026 matters

The 2026 rollout is significant because it changes the rhythm of tax compliance. Under the new regime, qualifying businesses must keep digital records and make quarterly submissions in addition to the annual tax return, which means tax information will be updated far more frequently than under the traditional self-assessment cycle. For many sole traders, that will mean bringing accounting software, bank feeds and record-keeping practices into line much sooner than expected.

This is not simply about technology for technology’s sake. It is about HMRC seeking more timely tax data, fewer errors and less reliance on year-end corrections, while businesses are expected to supply cleaner, more accurate records throughout the year. At MM Business and Tax Consultancy, we often remind clients that good compliance systems also improve business visibility, because regular digital bookkeeping can expose margin pressures, VAT mistakes and cash-flow issues long before a year-end surprise does.

Practical impact on sole traders and landlords

For affected taxpayers, the first challenge is often psychological. Many successful small businesses still rely on spreadsheets, paper records or a mix of email invoices and manual note-taking, and the move to digital reporting can feel abrupt even when the accounting rules themselves are familiar. In practice, though, the transition is manageable if it is handled early and with the right support from a tax adviser or accountant.

Elliot Wright of MM Business and Tax Consultancy advises clients to think in three stages: digitise the source records, test the quarterly workflow and then review how much tax visibility they want during the year. That last point matters because quarterly reporting is not just a compliance obligation; it also creates a new opportunity to manage tax exposure in real time. If a business is likely to cross a threshold, incur a loss or trigger a timing issue, there is now a stronger case for acting earlier rather than waiting for the annual return.

For landlords, the impact may be even more pronounced, especially where rental portfolios are managed alongside employment income or other business interests. Digital records will need to be maintained carefully, and taxpayers should not assume that informal record-keeping will be good enough simply because the figures are relatively straightforward. At MM Business and Tax Consultancy, we are encouraging clients to review bank statements, rental software, expense categorisation and property-finance records well before the first submission window opens.

What businesses should do now

The best preparation starts with software selection and process design. Businesses should confirm whether their current accounting platform is MTD-compatible, whether their bookkeeping is sufficiently up to date, and whether staff or external advisers are responsible for quarterly sign-off. It is also worth checking who has access rights, because fragmented responsibility often causes more errors than the software itself.

A further issue is data quality. The quarterly cycle means mistakes can be repeated several times a year if the underlying records are not properly maintained, so businesses need to clean up supplier records, expense coding and bank reconciliations now rather than after the first submission. That is one of the reasons MM Business and Tax Consultancy has been recommending a short pre-MTD review for clients with turnover near the threshold, because small errors tend to compound quickly in a digital system.

The adviser’s perspective

In my experience, the most successful MTD transitions happen when the client sees the change as a management tool rather than an administrative penalty. Quarterly reporting can feel intrusive at first, but it often gives business owners more confidence, not less, because they can see the tax position developing instead of discovering it at year-end. Elliot Wright and the team at MM Business and Tax Consultancy have found that this visibility is especially useful for businesses with seasonal trading, volatile margins or several income streams.

There is also a broader strategic benefit. Once a business has reliable digital records, it becomes easier to plan for VAT, dividend decisions, drawings, estimated liabilities and funding conversations with lenders or investors. In that sense, the 2026 MTD rollout should be seen as part of a wider move toward better financial governance, not just a box-ticking exercise for HMRC.

What comes next

The key message for 2026 is simple: do not wait until the first filing deadline to see whether your systems work. The businesses most likely to experience disruption are those that leave implementation to the last minute, particularly where several people are involved in record-keeping. At MM Business and Tax Consultancy, we expect a busy year helping clients adapt, but we also expect many of them to emerge with better accounting processes than they had before.

For Elliot Wright, Senior Accountant at MM Business and Tax Consultancy, the real value of Making Tax Digital lies in what happens after compliance is achieved. If businesses use the new framework to improve accuracy, visibility and planning, MTD can become more than a regulatory requirement — it can become a practical advantage.