A View From The Bridge - Carole Porter

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Carole is an Associate Director within Dains, an accountancy practice with offices across the UK. Carole is based in their Dundee office and supports businesses across the Dundee, Angus, Perth and Fife areas. With over 35 years of experience in accountancy practices she brings a breadth of knowledge across various industries and loves to help her clients thrive.

Making Tax Digital

Making Tax Digital (MTD) has been on the cards for a number of years. Currently all VAT registered businesses must submit their VAT returns under MTD. While the changes will directly affect sole traders and those with property income, they are also highly relevant for SME business owners, many of whom may be impacted personally or through their wider financial arrangements.

Across Dundee, Angus, Perth and Fife, I am already seeing clients ask what this means in practice, how it will change day-to-day processes, and where to start.

The next phase is happening from 5 April 2026. All non VAT registered sole traders and investment property owners will need to send quarterly income and expenditure reports to HMRC. This is being phased in as follows:

Income over £50,000 per year from 5 April 2026
Income over £30,000 per year from 5 April 2027
Income over £20,000 per year from 5 April 2028

To know when you need to comply look at your income for 2024/25. If it is above £50,000 then you will be in the first phase. If it is not, then again come the end of 2025/26, look at your income and if over £30,000 then you will be in phase 2..

What do you need to do?

To be MTD compliant, you will need to use an approved software to record business transactions. For many, this will be the first time using software for record keeping, previously relying on accountants to prepare annual statements from paper records and spreadsheets to then prepare tax computations and returns.

You will be given one month to submit the returns and the deadlines are as follows:

Q1 1 April to 30 June 7 August

Q2 1 July to 30 September 7 November

Q3 1 October to 31 December 7 February

Q4 1 January to 31 March 7 May

It is important to note that the returns are cumulative so the Q4 return will show figures for your full year.

You will then still have to submit one final return, your self assessment tax return, by 31 January of the following year.

Why is MTD being introduced?

The main reasons are:

To improve accuracy and reduce errors
To enhance transparency and manageability
Streamline Admin processes
Encourage better bookkeeping
Future proof the tax system
Government initiatives and investments

What does this mean for businesses?

If you are not already on an MTD compliant software, like Xero or Quickbooks, then you will need to move your bookkeeping very soon.

If you are already using software, make sure it is MTD compliant and it has the facility to file quarterly returns directly to HMRC. To do this you will need a Government Gateway log in.

If you are unsure of what to do:

Speak to your accountant. They should be able to advise you on what software to choose and may be able to help with the quarterly reporting.
If you do not have an accountant, then consider getting one.
Most software providers have free demonstrations on their websites so check these out too.

Final thoughts

MTD is imminent and it is important you understand when you will need to comply and be ready to make your returns. To prepare for this you should consider: