As we begin a new financial year, a key theme emerging from the Spring Statement 2025 is the government’s renewed push towards Making Tax Digital for small businesses. For small and medium-sized businesses (SMEs), sole traders, and landlords, this means getting ready for Making Tax Digital (MTD)—a shift that will fundamentally change how you record and report your income.

At Coopers&Co, we understand that these changes can feel overwhelming, especially when juggling day-to-day operations. That’s why we’re breaking down what you need to know now, how it may affect your business, and what we’re doing behind the scenes to make the transition as smooth as possible for our clients.

What is Making Tax Digital?

Making Tax Digital (MTD) is the government’s long-term strategy to modernise the tax system, with the aim of making it more efficient, effective, and easier for taxpayers to get right. It requires businesses and individuals to maintain digital records and submit tax information to HMRC using approved software.

You may already be familiar with MTD for VAT, introduced in 2019, with the next major milestone bringing MTD for Income Tax Self Assessment (MTD for ITSA) into force, eventually impacting sole traders and landlords who earn more than £30,000 annually.

When is MTD for ITSA coming?

According to the Spring Statement 2025, MTD for ITSA will begin its rollout from April 2026. This gives many businesses and individuals some breathing room. However, preparation should start now, particularly for those with more complex reporting needs or limited digital systems in place.

While this may feel like a distant deadline, the government is also investing significantly in HMRC’s digital infrastructure and compliance teams. Their aim is clear: to drive up compliance, reduce tax errors, and phase out paper-based returns entirely.

Who will be affected?

• Sole traders with annual income exceeding £50,000 from self-employment.
• Landlords with rental income exceeding £50,000 per year.
• Individuals who fall into both categories and have a combined annual income exceeding £50,000 (e.g., self-employed plus rental income).

In 2027, the threshold will drop to £30,000. Those earning under the threshold are not yet required to comply, but the government has signalled possible future expansion.

What will change?

• Keep digital records of income and expenditure.
• Use MTD-compatible software to submit quarterly summaries to HMRC.
• Submit an end-of-period statement (EOPS) and final declaration after the tax year ends.

This will replace the traditional once-a-year Self-Assessment tax return with a more ongoing, quarterly reporting cycle. While it doesn’t mean paying tax more frequently, it does mean staying consistently on top of your financial reporting throughout the year, allowing for better planning towards tax payments.

What software will I need?

MTD compliance means saying goodbye to spreadsheets and paper ledgers, and hello to cloud-based accounting platforms. These tools allow you to:

• Record income and expenses in real-time.
• Categorise transactions automatically.
• Submit returns to HMRC directly.

At Coopers&Co, we’re already testing and reviewing several MTD-ready platforms to recommend the best fit for our clients’ varied needs. If tech isn’t your strong point, we can handle submissions for you using your spreadsheets or by preparing records from scratch.

How might this affect your business?

The move to digital reporting offers clear benefits:

• Fewer errors: With less manual entry, there’s a reduced risk of mistakes.
• Better visibility: Real-time data gives you a clearer view of your finances year-round.
• Improved planning: Quarterly updates help you spot trends and manage cash flow more proactively.

However, we also understand the challenges:

• Software costs: Subscription-based accounting software comes with ongoing fees.
• Time investment: There’s a learning curve for those unfamiliar with digital tools.
• Admin burden: Quarterly submissions may initially feel like more work.

Planning ahead is key. By transitioning early, you’ll have time to adapt, get comfortable with the software, and build digital record-keeping into your regular routine.

How can Coopers&Co help?

We’re already putting plans in place to support our clients. No two businesses are the same, so our approach will be tailored to your needs. We’re developing a suite of MTD support packages, including:

• Hands-on help choosing and setting up MTD-compatible software.
• Quarterly reporting services.
• Training and guidance for self-managed submissions.
• Compliance health checks and reviews.

We’ll share full details soon. Meanwhile, if you have questions, we’re ready to help. You can always get in touch with our friendly team in Sywell for a no-obligation chat about how MTD might affect you.

Fill out our enquiry form to request a call or email and find the right fit for you and your business.
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