Making Tax Digital (MTD)
Spring, 2026 HM Revenue and Customs is introducing the biggest shake-up of the self-assessment tax system in decades known as Making Tax Digital (MTD), it will transform the way tax returns are submitted, adding a new “quarterly updates” requirement.
HMRC recently issued an “act now” warning, saying that more than 860,000 sole traders and landlords need to start preparing for the change if they haven’t done so already but they are just first wave of people affected – number is poised to rise to almost 3 million by spring 2028 as lower-income individuals are brought into the system. HMRC recently issued an ‘act now’ warning for Making Tax Digital.
What is Making Tax Digital?
It’s a new system for recording and reporting your tax information to HMRC. It affects self-employed people recipient of property income above HMRC’s income thresholds. says Scarlet Johnson a technical officer at HawkEye Accountants Tax Reform Group.
From this April, the starting threshold is £50,000. On 6 April, 2027, the MTD threshold will fall to £30,000. The figure is for self-employment and property income earned in the 2025-26 tax year (the one we are in now) & from 6 April, 2028, the threshold will fall further: to £20,000 for property and self-employment income earned in the 2026-27 tax year.
People earning over those thresholds will have to use commercial software to send HMRC an annual tax return, as well as quarterly updates showing their total income and expenses from property and self-employment. These quarterly updates must be based on digital records that show the value and date of each transaction and, where appropriate, detail which HMRC category of “allowable expenses” each expense falls into, Mrs Johnson says.
How do I know if I’m affected?
Check your 2024-25 tax return. If you were registered for self-assessment and your combined turnover from property and self-employment exceeded £50,000, you are legally required to move to the new system, unless you qualify for an exemption. If your combined turnover from self-employment and property exceeds the relevant threshold, you must move to the new system unless you qualify for an exemption this year.
Landlords will need to comply with the new digital tax system if their income is over a specified threshold. The £50,000 threshold applies to turnover (ie your gross income, before your tax and expenses have been taken into account), not profits. You must combine your turnover from property and self-employment to assess whether you exceed the threshold. Expect your turnover to be ‘annualised’ – proportionally adjusted – by HMRC if you started your business mid-year. Other sources of income, including employment and / or PAYE income, do not count.
Even though they are self-employed, foster carers, kinship carers and shared-life carers who receive “qualifying care relief” on income from their care activities will find this income is exempt from MTD and does not count towards the threshold. Bear in mind you can also earn up to £1,000 from renting out property or trading each year, or up to £7,500 a year under the rent-a-room scheme, without needing to report this on your tax return – which means HMRC will not take this income into consideration. You can still earn up to £1,000 from renting out property, or up to £7,500 under the ‘rent a room’ scheme, without declaring it on your tax return.
HMRC is writing to affected taxpayers in February and March, but even if you don’t receive a letter, it is your legal responsibility to comply with MTD. “If your letter gets lost in the post, you must still sign up, unless you’re exempt,” says Johnson. You can use HMRC’s step-by-step online guide to sign up.
Who is automatically exempt?
There are some groups of people who do not have to use this system, no matter how much they earn. They include:
- People who don’t have a national insurance number.
- Until at least April 2029: disabled people who receive the blind person’s allowance.
- Until at least April 2027: recipients of qualifying care relief who also earn income from property or self-employment.
- Limited companies. MTD only applies to individuals. If you are a company director whose only income is your salary and dividends, even if you perceive yourself to be self-employed, your income does not qualify.
- A full list of people who qualify for exemptions can be found in the MTD guidance on Gov.uk.
Can I get an exemption?
You can apply to HMRC for an exemption if it is not reasonably practical for you to use digital software (for example because of your age, disability, or because the remoteness of your location means you cannot get internet access at your home or business) or if you are a practising member of a religious order “which forbids you using a computer”, says Daryl Cockman of our partner insolvency firm Capital Brooks. Applications are assessed on a case-by-case basis. You should continue preparing for MTD while awaiting a decision. It won’t be enough simply to say you need an exemption because of your age, Johnson warns. “You’d have to explain how your age affects your ability to comply,” she says..
How do I comply?
You (or your accountant or bookkeeper) need to use MTD-compliant software to send quarterly digital updates, due just over one month after the quarter ends.
For example, records for the first quarter, 6 April 2026 to 5 July 2026, must be submitted by 7 August 2026. Records for the second quarter must be submitted by 7 November 2026. Late submissions will incur penalties.
Charity & Non-Profit
The 2026 Charities Statement of Recommended Practice (SORP) introduced important changes to financial reporting, but, for many charities experiencing funding pressures, implementation risks slipping down the priority list. With constrained resources and growing operational demands, it can be tempting to postpone preparation until the year-end accounts process begins. However, delaying engagement could make the transition significantly more difficult and costly. Early planning will not only reduce pressure on finance teams but also help charities avoid unexpected reporting issues, minimise audit disruption and ensure trustees have sufficient time to understand the implications of the new requirements.
Early preparation will save time and cost many charities continue to operate with lean finance teams, while others rely heavily on volunteers or staff with broad responsibilities. Funding constraints have led many organisations to focus resources on frontline service delivery, leaving back-office functions with limited capacity to undertake major accounting projects. While these pressures are understandable, postponing implementation until year-end will add significant technical assessments into an already busy reporting timetable. Finance teams, trustees and auditors could find themselves working through complex accounting judgements simultaneously, increasing the risk of delays and additional audit procedures, and lead to higher audit costs.
For charities that have started their current financial year on or after 1 January 2026, the risks are even more urgent, as that’s when the new SORP took effect. These organisations should already be applying the new SORP requirements within their management accounts, particularly for areas such as lease accounting and income from contracts. However, we hear from our members in practice that many charities are still preparing their internal finance reports based on outdated standards. These charities may find that significant adjustments are only identified during the year-end reporting process, creating avoidable challenges for finance teams, auditors and trustees. Late changes can also affect the quality of management information presented to boards and reduce the time available for trustees to understand the financial implications of the new accounting treatments before approving the annual report and accounts.
A phased approach allows charities to spread the workload over several months. Reviewing accounting policies, identifying transactions affected by the new requirements and discussing potential issues with auditors in advance can help avoid last-minute surprises. Trustees also benefit from having sufficient time to understand how the changes affect the charity’s financial reporting and governance responsibilities. Focus on the areas that matter most Committee members have identified several areas where charities are likely to need additional support. Lease accounting remains one of the most significant challenges, particularly for smaller and medium-sized charities. Social donation and peppercorn leases introduce accounting considerations that many finance teams have limited experience of applying in practice.
Recognising this, the Charity Commission is expected to publish an information sheet on lease accounting to complement the guidance contained within the Charities SORP and FRS 102. This will provide additional practical support as charities work through the new requirements. Our SORP hub also includes a recorded training session on the changes to lease accounting, accompanied by linked third party resources, such as the FRC’s factsheet on lease accounting for lessees and Crowe UK’s Better Lease Accounting guide, which includes a complimentary Excel workbook (Crowe’s FRS 102 Lease Implementation Tool).
Revenue recognition is another area where charities should begin reviewing existing arrangements. Understanding whether income arises from an exchange transaction or a non-exchange transaction can have a significant impact on when and how income is recognised. Similarly, distinguishing between grants and contracts requires careful consideration of the substance of each arrangement rather than simply relying on the terminology used in funding agreements. Membership income also deserves particular attention. In some cases, membership subscriptions may represent donations that support the charity’s overall objectives rather than payments made in exchange for goods or services. Applying the appropriate accounting treatment requires careful analysis of the rights and obligations associated with each membership scheme.
A step-by-step guide to implementation
If you haven’t started yet, don’t panic. We have many resources on our free SORP hub to help you and guide you through the transition. At our 2026 Charity Conference, speakers from Sayer Vincent suggested the following preparatory steps in their session about the new SORP:
- Identify the tier for your charity
- Consider new requirements for the Trustees’ Annual Report
- If the charity is Tier 1, decide whether to use the natural or activity basis for the Statement of Financial Activities
- Review FRS 102 income and lease changes
- Determine if a statement of cashflows is required
- Consider the transition and take advice
The session recording (‘Charities SORP 2026: Practical updates in action’) is freely available on our SORP hub and signposts to other resources, including recordings on specific areas of the new SORP:
- Lease accounting (‘Lease accounting changes: next steps for charities’)
- Revenue (‘Income recognition: what’s changing in the Charities SORP 2026?’)
- Trustees’ Annual Report (‘Trustees’ annual report: prepare for Charities SORP 2026’)
- Tier 1 charities (‘Small charities: preparing for change’)
- Impact and sustainability reporting (‘Impact and sustainability reporting: turning principle into practice’)
- Reserves reporting (‘Charity Reserves: from basics to best practice’)
- Transitioning to receipts and payments accounts – if eligible (‘SORP 2026: time to switch to Receipt & Payments accounts?’)
The new SORP presents an opportunity for charities to strengthen financial reporting processes and improve the quality of information available to trustees and stakeholders. By engaging with the requirements now, charities can make the transition more manageable and reduce the risk of increased professional fees and unwelcome surprises for trustee boards at year-end.alties.
Financial & Operational Planning
Financial planning isn’t just a nice-to-have – it’s essential to your business’s long-term success and sustainability. But what exactly is it, and how does it impact the bottom line? Let’s find out.
What is financial planning?
Financial planning might sound like corporate jargon, but it’s simpler than you think. At its core, financial planning is about making sure your business has a roadmap for its finances. It involves looking at your current financial situation, setting goals, and then working out how to get there. Planning your finances starts with taking stock of what you’ve got – your income, expenses, assets, and debts. Then, you think about where you want to be in the future. Perhaps you want to boost revenue, reduce expenses, or save for a big investment. Or perhaps, like many businesses, you want to do all of these things and more at the same time. Once you’ve got your goals in mind, it’s all about making them happen. This could mean everything from better budgeting to more ambitious marketing, and it could even involve making changes to your business operations.
The goal of financial planning
Ultimately, goal of financial planning is to ensure your business is successful and sustainable in the long term. With clear financial objectives and a plan to achieve them, you can keep your business on right track and prepare for challenges and opportunities that arise along the way. Why financial planning is crucial? Since now we understand what financial planning is, let’s explore why it’s so important for your business. Staying focused on what you want to achieve sometimes, competing motivations among stakeholders make it easy to stray from your initial objectives. A robust financial plan helps you make confident decisions that support your goals rather than distract from them.
Managing cash flow
Financial planning helps you strike the right balance between the money coming into and out of your business. By creating a budget and tracking your expenses, you can ensure you always have enough cash on hand to cover obligations such as paying employees and suppliers on time.
Growing your business
A detailed financial plan identifies growth opportunities you might not have noticed otherwise. By analysing your sales data and seeking out new revenue streams or ways of enhancing existing ones, you can develop strategies to boost profits. For example, you could decide to launch a new product or service, expand into unfamiliar markets, or take a fresh approach to your marketing.
Investing wisely
Financial planning lets you develop investment strategies that align with your business’s goals and risk tolerance. This might include investing in stocks, bonds, real estate, or other assets that have the potential to generate returns over time. You could lower your risk by spreading investments across different types of assets and industries, protecting your money from sudden changes in the market. At the same time, smart investment strategies can maximise your profits by minimising what you owe in taxes.
Managing risk
Finally, financial planning helps businesses anticipate and defend themselves against problems before they arise. Assessing your business’s vulnerabilities and putting risk management strategies in place makes you more resilient in the face of things like economic downturns, natural disasters, and legal liabilities. Insurance plays a crucial role in risk management, and financial planning can help you identify the types and levels of insurance coverage that will help your business most. This might include property, liability, or business interruption insurance, or even key person insurance to protect against losing your most valuable employees.
How does financial planning help businesses achieve their goals?
Financial planning ensures you’re not simply winging it when it comes to forming and meeting your goals. While other business plans might include high-level actions and vague measures, financial plans provide a tangible path to success. They use financial data rather than gut feel to underpin decisions, while giving you measurable performance indicators so you can easily keep track of progress.
With a financial plan in place, you’ll be able to set relevant goals, develop effective strategies to achieve them, make informed decisions, and evaluate success in a meaningful way. At the same time, you can swiftly adapt to changes and seize opportunities for growth before it’s too late. ou were registered for self-assessment and your combined turnover from property and self-employment exceeded £50,000, you are legally required to move to the new system, unless you qualify for an exemption. If your combined turnover from self-employment and property exceeds the relevant threshold, you must move to the new system unless you qualify for an exemption this year.