18 July 2025
The government’s Making Tax Digital (MTD) initiative is set to transform how businesses and individuals report their income to HMRC. With the next stage of MTD rolling out from April 2026, it’s essential that all small and medium-sized enterprises (SMEs) understand what’s changing—and how going digital can actually make life easier.
What Is MTD?
MTD is HMRC’s push toward a modern, streamlined tax system. Under the new rules, affected businesses and individuals will be required to:
- Keep digital records of income and expenses
- Submit quarterly updates to HMRC using MTD-compatible software
- File an end-of-year final declaration, replacing the traditional Self Assessment tax return
Who Is Affected?
The changes will be rolled out in phases:
- From April 2026 – Self-employed individuals and landlords earning over £50,000 per year
- From April 2027 – Threshold lowers to £30,000 per year
- April 2028 and beyond – Further expansion expected
This includes:
✅ SMEs operating as sole traders or partnerships
✅ Landlords letting out property in the UK
How a Digital System Will Help
Transitioning to an MTD-compliant system can feel like a burden at first—but there are clear long-term benefits:
💡 For SMEs:
- Streamlined Bookkeeping – Reduce time spent manually inputting figures
- Fewer Errors – Software catches common mistakes automatically
- Improved Cash Flow Management – See your profit position in real time
🏠 For Landlords:
- Track Expenses Easily – Snap and store receipts on the go
- Clear Overview of Portfolio Income – Especially helpful for those with multiple properties
- Plan for Tax Bills – No more last-minute surprises
Exemptions and Support
Some taxpayers may be exempt from MTD if they can’t use digital tools due to age, disability, or location. HMRC also offers a public testing phase in 2025/26, which is a great opportunity to get familiar with the new system before it becomes mandatory.
Penalties are Changing
From April 2025, HMRC is introducing tougher penalties for late submissions and payments:
- 3% of the tax owed if unpaid after 15 days
- Escalating to 10% annually if unpaid after 31 days
Now is the time to get organised and avoid future issues.
What You Should Do Now
- Review whether your income is above the relevant threshold
- Choose MTD-compliant software tailored to your industry
- Consider working with a bookkeeper or accountant who understands MTD and your sector
- Join HMRC’s pilot scheme if eligible, to test the process early
MTD doesn’t have to be a hassle. With the right tools and advice, it can actually make your business more efficient and more compliant. Whether you’re running a small business, managing a property portfolio, or overseeing a law firm’s finances—embracing digital is a smart move.
How Lynam & Co Can Help
At Lynam & Co, we understand that Making Tax Digital isn’t just a change in how you report to HMRC—it’s a complete shift in how you run your finances. That’s why we offer a range of flexible, cost-effective services designed to make your transition to MTD as smooth as possible.
We help SMEs and sole traders by setting up and maintaining MTD-compliant digital accounting systems such as Xero or QuickBooks or something more complex like Microsoft Dynamics, tailored to your specific industry and workflow. Whether it’s monthly bookkeeping, VAT returns, or preparing your quarterly income updates, we handle the day-to-day compliance so you can focus on growing your business.
For landlords, we take the hassle out of property income reporting. From digitising your rent and expense records to tracking mortgage interest and maintenance costs, we’ll ensure your quarterly submissions and year-end declarations are accurate and stress-free.
For law firms, we bring specialist experience in both legal cashiering and compliance with the SRA Accounts Rules, meaning we’re uniquely positioned to manage your office account bookkeeping while ensuring your personal tax affairs are MTD-ready. We understand the nuances of legal finances and can integrate with your existing case management systems to streamline your reporting.
Whether you’re looking for full-service support or just help getting started, Lynam & Co is here to guide you through MTD every step of the way.