Tax and compliance
Making Tax Digital: how to prepare your business records
Making Tax Digital is not one universal start date for every business. Identify the relevant tax, taxpayer and qualifying income before choosing software or changing how you submit information.
Quick answer
For Income Tax, HMRC’s current timetable starts with eligible sole traders and landlords above the relevant qualifying-income threshold. Keep digital records, use compatible software and follow the required reporting process. Limited-company tax and VAT obligations must be considered separately.
Key points
- Qualifying income is not simply accounting profit.
- The Income Tax timetable does not automatically apply to a limited company.
- Software needs correct setup, reconciled records and an agreed agent workflow.
Check whether and when the Income Tax rules apply
HMRC’s guidance, checked on 16 October 2026, applies the thresholds to qualifying self-employment and property income. Eligibility, exemptions and the reference tax year matter. Use HMRC’s checker rather than deciding from one month’s turnover.
The guidance says partnerships will join in future on a timetable to be announced. Do not substitute these dates for VAT or Corporation Tax requirements.
| Qualifying income and reference year | Start date |
|---|---|
| Over £50,000 in 2024–25 | 6 April 2026 |
| Over £30,000 in 2025–26 | 6 April 2027 |
| Over £20,000 in 2026–27 | 6 April 2028 |
Prepare a consistent digital record
Choose software that supports your specific obligations and business activities. Map bank accounts, sales, expenses and property records appropriately. Retain evidence and review categorisation rather than assuming a bank feed produces correct tax treatment.
Separate company and personal transactions and agree how corrections, refunds and jointly owned property are handled where relevant. Digital records do not make an expense allowable merely because it has been imported. Ask your accountant about difficult transactions.
Agree responsibilities with your accountant or agent
Confirm who keeps records, reconciles them, submits updates and handles the final tax position. Check authorisation, software access and handover dates. Run a test workflow before a deadline rather than discovering that two systems do not exchange the necessary information.
More frequent reporting is not a guarantee that the underlying tax payment dates or amounts work the way you expect. Follow the relevant HMRC process and distinguish an update from a final calculation. Keep a tax cash provision alongside the records.
Check exemptions and avoid confusing different regimes
HMRC describes exemptions, including digital exclusion, and distinguishes those granted automatically from those requiring an application. If you think an exemption applies, use the official guidance and confirm the reporting duties that remain.
VAT has a separate Making Tax Digital regime, and a private limited company’s Company Tax Return follows its own requirements. The appropriate solution can involve more than one obligation. Budget for software, training and adviser time, but do not buy an unnecessary finance product just because a filing process is changing.
Use the correct income basis and reference year
A threshold test can be wrong if it uses profit, current bank receipts or only one activity when HMRC’s rules require another measure. Review the definition of qualifying income and the relevant year in the official guidance. Keep the calculation and supporting tax information.
If circumstances involve more than one trade, property income or jointly owned property, obtain advice on how the rules apply to the individual taxpayer. Do not simply add all household income or assume company turnover is personal qualifying income. An accurate eligibility decision comes before software selection. Where HMRC contacts you, check the notice against the official guidance and your actual records rather than disregarding it or acting on an unverified message.
Choose software for the workflow you need
Compare compatibility, supported activities, access controls, export options, support and total ongoing cost. Ask how corrections and an accountant’s involvement work. A low headline subscription can be less useful if it does not support a material part of the taxpayer’s affairs.
Test a small set of genuine transactions and check the resulting records with the bookkeeper or accountant. Confirm how data can be retrieved if the subscription ends or the provider changes. Software is a tool for maintaining and submitting information, not a substitute for understanding its tax treatment. Avoid buying a package solely because an unsolicited sales message says every business must use it immediately.
Build a calendar for records, updates and finalisation
Agree when transactions are entered, reconciled and reviewed before submission. Give the accountant enough time to ask questions rather than sending a mixed collection of receipts at the deadline. Keep an audit trail of corrections and responsibility for each stage.
Show reporting dates and tax-payment assumptions separately in the cash forecast. A more frequent update does not, by itself, establish that the entire tax bill is paid at that moment. Confirm the applicable process through HMRC guidance and professional advice. The administrative change should improve record discipline without creating a false impression that submitted figures are automatically final, complete or reconciled to every other obligation.
Address access difficulties through the official route
If digital access, disability, location or another circumstance creates difficulty, read HMRC’s exemption and support guidance. Do not assume that disliking software creates an exemption, or that needing help means none is possible. The facts and application process matter.
Keep records of any exemption decision and confirm what alternative responsibilities remain. If support from an agent is appropriate, agree authority and secure access rather than sharing credentials informally. An exemption question should be resolved early enough to avoid an unnecessary missed deadline. Continue maintaining reliable financial records whichever reporting route applies; they remain important for tax, cash management and any future finance application.
Run a readiness check before the first required submission
Confirm eligibility, registration where required, software compatibility, agent authority and a reconciled sample of records. Identify who corrects errors and who confirms submission. Keep the reporting calendar visible to everyone involved rather than relying on a reminder held by one person.
Budget for the recurring administration and retain access to supporting documents. If an exemption or unusual income question is unresolved, seek the appropriate HMRC guidance or professional advice early. The objective is a reliable reporting process, not merely a software purchase. Accurate digital records should also help the business understand cash and commitments outside the tax deadline.
Common questions
- Does the £50,000 threshold mean profit?
- No. HMRC uses qualifying income under its defined rules. Check the official calculation and reference tax year.
- Does using accounting software mean I am compliant?
- Not automatically. Eligibility, registration, compatible software, records, authorisation and submissions all need to be correct.
Sources
Sources were checked on 16 October 2026. A source check confirms what these publications said on that date; it is not a financial review of any product.
- When to use Making Tax Digital for Income Tax — HM Revenue & Customs
- Filing accounts and Company Tax Returns — Companies House and HMRC