Making Tax Digital 2026: what every UK high street business owner needs to do now

If you run a salon, barbershop, aesthetics clinic, restaurant, or any other sole trader business in the UK, and your income is over £50,000 a year — this deadline applies to you.

Making Tax Digital for Income Tax (MTD ITSA) becomes mandatory in April 2026 for sole traders earning over £50,000. A year later, in April 2027, the threshold drops to £30,000.

This is not a small administrative change. It affects how you record your income, how often you report to HMRC, and what software you need to use.

What Making Tax Digital for Income Tax actually means

Currently, most sole traders submit one Self Assessment tax return per year. Under MTD for Income Tax, you will need to:

1. Keep digital records of your income and expenses throughout the year
2. Submit quarterly updates to HMRC (every 3 months)
3. Submit a final end-of-year declaration confirming your total income

The quarterly updates replace the annual Self Assessment for income tax reporting. You will still complete a Self Assessment for anything outside the scope of MTD.

Who is affected in April 2026?

April 2026 (year 1): Sole traders and landlords with total annual income over £50,000.

April 2027 (year 2): Sole traders and landlords with total annual income over £30,000.

Partnerships are expected to follow in a later phase (not yet confirmed).

If your business is a limited company rather than a sole trader structure, MTD for Corporation Tax will come later — this current phase applies to sole traders specifically.

What you need to do before April 2026

Step 1: Check if you're affected

Add up your total income for the 2024–25 tax year (the year ending April 2025). If it exceeds £50,000, you are in scope for April 2026.

If you're not sure, check your 2024–25 Self Assessment return once completed, or speak to your accountant.

Step 2: Choose MTD-compatible software

You must use HMRC-recognised software. The main options for small businesses:

• Xero — popular with businesses using an accountant. Good integration with bank feeds.
• QuickBooks — has free tier options for simple businesses. Note: Xero and QuickBooks have increased their pricing significantly in 2025–2026.
• Sage — Sage has a free API and is competitive on pricing.
• FreeAgent — free for businesses with NatWest/RBS banking accounts.

ReeveOS's accounting integrations (Sage via free API, Xero) allow your booking and payment data to flow automatically into your accounting software, reducing manual entry significantly.

Step 3: Connect your bank feeds

Most MTD software connects directly to your business bank account and imports transactions automatically. Set this up as early as possible — it saves hours of manual bookkeeping.

Step 4: Understand your quarterly deadlines

Under MTD, your quarterly submission periods will be:

• Q1: 6 April – 5 July (submit by 7 August)
• Q2: 6 July – 5 October (submit by 7 November)
• Q3: 6 October – 5 January (submit by 7 February)
• Q4: 6 January – 5 April (submit by 7 May)

You do not need to pay tax quarterly — just report. Your tax payment schedule remains broadly the same.

Step 5: Get your bookkeeping habits in order

The biggest practical challenge is keeping records up to date throughout the year rather than pulling everything together once a year. MTD requires contemporaneous digital records — not reconstructing the year from bank statements in January.

For salon and service business owners, this means:

• Using your booking software to record all sales automatically
• Connecting your payment terminal to your accounting software
• Photographing or scanning receipts for expenses as you incur them (apps like Receipt Bank or Dext help here)
• Reconciling your accounts monthly rather than annually

The honest view on effort required

If you currently do your own bookkeeping for a straightforward sole trader business, MTD will require you to change your habits and invest in software you may not currently use.

If you already use cloud accounting software with bank feeds, the additional work is minimal — you're essentially already doing what MTD requires, just without the quarterly submission step.

If you currently hand your bank statements and a shoebox of receipts to an accountant once a year, you have a bigger transition ahead. The sooner you start, the less painful it will be.

Finding an accountant for MTD

If you don't currently work with an accountant and are in scope for April 2026, now is the time to find one. Good MTD-aware accountants are busy and many are already booked up for the transition period.

Look for accountants who advertise MTD readiness. HMRC maintains a list of MTD-compatible software, which your accountant should be working with already.