Becoming Digitally Ready: What Small Businesses Need To Know About MTD

Keeping up with HMRC’s changing rules isn’t exactly at the top of every business owner’s to-do list. But if you’ve heard the term Making Tax Digital (MTD) and quietly thought, “I’ll deal with that later”, you’re definitely not alone.

For many small businesses, switching from paper or spreadsheet bookkeeping to digital tools feels like one more thing to juggle. But the truth is, MTD isn’t just about ticking a box—it’s about getting ahead, staying compliant, and making life easier regarding your finances.

This blog breaks down what small businesses really need to know about MTD, what you need to do, how to prepare without being overwhelmed and more.

Wondering where to start? That’s where Bells Accountants comes in. We help small business owners get digitally ready and stress-free—no jargon, just straight answers.

Contact us today on 020 8850 0700 or email our team at and let us make your MTD journey simple, smooth, and sorted!

Let’s See What Small Businesses Need To Know About MTD

What Exactly Is Making Tax Digital (MTD)?

First of all, let us start by introducing you to Making Tax Digital (MTD).

Making Tax Digital is part of a digital tax transformation led by HMRC, designed to simplify and modernise how taxes are reported. Instead of filing a paper Self Assessment once a year or juggling spreadsheets, businesses must keep digital records and submit updates to HMRC every quarter using approved MTD software for small businesses.

Think of it like online banking—but for taxes. More streamlined, more transparent, and far less paperwork to dig through at tax time.

The end goal? To help businesses stay compliant, reduce errors, and manage their taxes more easily with digital submission.

Who Needs To Worry About MTD?

Right now, MTD for VAT is already mandatory for most VAT-registered businesses. You should already use MTD-compliant software to send returns if that’s you.

But here’s where things are changing again.

Starting 6 April 2026, MTD for Income Tax Self Assessment (ITSA) kicks in for:

• Sole traders and landlords earn over £50,000; from April 2027, it will extend to those with an income above £30,000.

Other groups—like partnerships—may be included later, so staying ahead of MTD deadlines for small businesses is key.

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So, What Does A Small Business Actually Have To Do?

Here are the MTD rules and requirements for small businesses in the UK:

1. Keep Digital Records

Gone are the days of scribbled notes and shoeboxes full of receipts. You’ll need to track income and expenses using digital record-keeping tools. Spreadsheets alone won’t cut it unless you use bridging software linking to HMRC.

2. Send Quarterly Submissions

You’ll send HMRC updates every three months. Think of it like a mini tax return—less last-minute panic, more peace of mind.

3. Submit An End-Of-Period Statement

This wraps up the tax year and lets you make any necessary adjustments to your income or deductions.

4. Final Declaration

Instead of a once-a-year return, you’ll confirm everything is accurate and pay what’s due, just like before—but digitally.

These new MTD filing requirements in the UK are about accuracy and efficiency. And they’re not as scary as they sound—promise.

What Kind Of Software Will A Small Business Need?

You’ll need MTD software for small businesses that is HMRC-approved. Some of the most popular names are:

• Xero
• QuickBooks
• FreeAgent
• Sage
• Zoho Books

We’re a Xero Platinum Partner, providing expert support and exclusive benefits through the leading cloud-based accounting platform.

Your software should be:

• Easy to use (for you and your accountant)
• Fully compatible with MTD for VAT and ITSA
• Capable of handling your chosen accounting period

Bells Accountants can help you choose the right fit—no upsells, no nonsense—just what you need to stay on top of your business tax responsibilities.

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Can You Sign Up Voluntarily Before It’s Mandatory?

Yes! Many small businesses get ahead of the curve by signing up early.

You’re eligible if:

• You’re a UK resident
• You’ve submitted at least one Self-Assessment
• You use an accounting period that runs from either 6 April to 5 April or 1 April to 31 March

Not eligible if:

• You’re in a partnership
• You use income averaging (like writers or farmers)
• You’re going through bankruptcy or under a compliance check
• You claim special allowances or submit on behalf of others

If unsure, we’ll check your eligibility—just reach out!

Busted! Common MTD Myths

• Myth: “It means I’ll pay more tax.”

Not at all. MTD just changes how you report tax, not how much you owe.

• Myth: “Now I’ll be filing every month.”

No—you’ll only need to file four times a year, plus a final declaration.

• Myth: “I’ll have to figure all this software out alone.”

Definitely not. That’s exactly what we’re here for.

The Benefits Of MTD For Small Businesses

So, what’s in it for you? Here are the benefits of MTD for small businesses:

• Less admin stress and paperwork
• Fewer errors (and reduced risk of penalties)
• Real-time visibility over your income and expenses
• Easier collaboration with your accountant
• Compliance with government tax compliance rules and MTD requirements for small businesses in the UK

Basically, it’s a smoother, more efficient way to manage your finances.

What Happens If You Don’t Comply?

If you ignore the Making Tax Digital deadlines for businesses, HMRC may begin applying MTD penalties from 2026 onwards.

The new points-based system means:

• Missing submissions earn points
• Enough points = a fine
• The more frequently you miss, the worse it gets

So, while HMRC might start a bit lenient, repeat offenders will start to feel the financial sting.

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Bells Accountants Can Help You Get Ready Digitally With Making Tax Digital (MTD)

We know all this talk of MTD rules, software, submissions, and tax jargon can be overwhelming. But that’s exactly why we’re here—to remove the pressure.

Here’s how our accountants can help you make the transition easy:

• We will help you understand exactly what small businesses need to know about MTD
• We assess when and how MTD applies to your small business
• We help you find the best MTD software for small businesses
• We do the setup and training for you
• We take care of the quarterly and yearly digital submissions

Just pick up the phone and call us on 020 8850 0700 or message us at , and we’ll get back to you as soon as possible.

We’ll help you stay ahead of every MTD VAT deadline, confidently and stress-free.

Final Thoughts: Don’t Wait Until The Deadline

The truth is, the sooner you embrace digital tax, the smoother your transition will be. Waiting until 2026 is technically fine, but why wait for a scramble when you can get set up with help now?

Whether you’re unsure where to start, drowning in spreadsheets, or just want some friendly advice, we’ve got you covered.

Contact us today and take the hassle out of Making Tax Digital, so you can get on with running your business.