Making Tax Digital (MTD): What Small Businesses Need to Know Before April 2026

If you run a small business like a hair salon, plumbing business, trade service or local shop, you may have heard the term Making Tax Digital (MTD) — but you might not be totally sure what it actually means for you.

You’re not alone.

Many early-stage businesses don’t realise that new MTD rules are coming into force in April, and they will affect how you keep records and report your income to HMRC.

This blog explains MTD in simple, practical terms, without jargon.

What is Making Tax Digital (MTD)?

Making Tax Digital is HMRC’s way of moving tax reporting fully online.

Instead of:

• keeping paper records, or

• using spreadsheets alone, or

• only dealing with tax once a year

HMRC wants businesses to:

• keep digital records, and

• submit regular updates using approved software.

The goal (from HMRC’s point of view) is fewer mistakes — but for small businesses, it does mean a change in how you work.

Who does MTD apply to?

From April, Making Tax Digital for Income Tax will apply to:

• Self-employed individuals, and

• Landlords,

who have combined annual income over £50,000.

⚠️ Over the next few years, this threshold is expected to reduce — meaning more small businesses will be included.

If you’re:

• a hairdresser

• a plumber

• a tradesperson

• a salon owner

• a mobile service provider

…you should assume MTD will apply to you at some point, even if it doesn’t yet.

What actually changes under MTD?

MTD means you will need to:

✅ Keep digital records

This includes:

• income

• expenses

• invoices

• receipts

Paper records alone will no longer be enough.

✅ Use MTD-compatible software

HMRC requires approved software such as:

• Xero

• QuickBooks

• FreeAgent

• other approved tools

Spreadsheets can still be used only if they link digitally to approved software.

✅ Submit updates more often

Instead of one tax return per year, MTD introduces:

• Quarterly updates (summaries, not full tax bills)

• An end-of-year declaration

This doesn’t mean you pay tax four times a year — but you do report more often.

Why small businesses struggle with MTD

Most early-stage businesses struggle with MTD because:

• they weren’t set up digitally from day one

• bookkeeping feels confusing or overwhelming

• pricing, expenses and cashflow aren’t always clear

• they’re already busy “doing the work”

• they don’t know what HMRC actually expects

MTD doesn’t cause these problems — it exposes them.

What should you do now?

If you’re a young business, the best approach is:

1️⃣ Check whether MTD applies to you now or soon
2️⃣ Get your bookkeeping in order early
3️⃣ Choose simple, user-friendly software
4️⃣ Put basic systems in place
5️⃣ Get support if you’re unsure

You don’t need to panic — but you do need to prepare.

Final thought

Making Tax Digital isn’t just a tax change — it’s a business systems change.

Handled properly, it can:

• improve cashflow

• reduce stress

• give you better visibility of your business

• stop nasty tax surprises

Handled badly, it can feel overwhelming.

If you’re not sure where to start, getting practical business support (not just accounting help) can make all the difference.

Need Help Getting MTD-Ready?

We offer simple, affordable support for sole traders, including:

✔ Choosing the right software
✔ Setting up your bookkeeping
✔ Training you on the basics
✔ Getting your digital records ready for HMRC
✔ Optional “We do it for you” monthly support

If you want to stay compliant and avoid fines, we can help you set everything up quickly.

👉 Book a Free Discovery Call
We’ll walk you through exactly what you need to do before April 2026.