Introduction
From April 2026, HMRC is extending Making Tax Digital (MTD) to cover Income Tax Self-Assessment (ITSA).
This change affects thousands of sole traders and landlords — including many in Dorking, Reigate, Redhill, Epsom, Tadworth, and across the wider Surrey area.
At Smart Accountants Sussex & Surrey, we’re already preparing clients for MTD.
In this guide, our Surrey accountants explain everything you need to know about Making Tax Digital for Income Tax 2026:
- What MTD for Income Tax means
- Who it applies to (and who it doesn’t)
- Key deadlines
- Common mistakes to avoid
- How to stay compliant without stress
👉 Got questions already? Contact us today or call 01737 847 779
What is Making Tax Digital for Income Tax?
Making Tax Digital (MTD ITSA) replaces annual tax returns with quarterly digital updates.
Instead of one return a year, you’ll need to:
- Keep digital records of income and expenses
- Submit quarterly reports to HMRC using MTD-compatible software (like Xero)
- File an end-of-period statement and a final declaration each year
❌ Note: Limited companies are not included in MTD for Income Tax. They remain under Corporation Tax rules (though MTD for Corporation Tax is planned for the future).
Who Needs to Follow Making Tax Digital for Income Tax 2026?
HMRC is phasing in MTD based on income:
- From April 2026 → £50,000+ in the 2024/25 tax year
- From April 2027 → £30,000+ in the 2025/26 tax year
- Future phase (expected, subject to legislation) → £20,000+ in the 2026/27 tax year, starting April 2028
👉 Qualifying income = total gross income from self-employment and property (before expenses).
That means many business owners and landlords in Dorking, Reigate, Redhill, Epsom, Tadworth, and the wider Surrey area will need to change how they report to HMRC.
Exemptions
Not everyone has to follow MTD rules. You can apply for an exemption if:
- You can’t use digital tools because of age, disability, or remoteness
- Your religious beliefs prevent using electronic systems
- If you think you may qualify, speak to us before Making Tax Digital for Income Tax 2026 goes live
📌 Apply for an MTD exemption here (gov.uk)
Key Deadlines for Making Tax Digital for Income Tax 2026
- First phase: April 2026 for income over £50,000
- Quarterly submissions: due one month + 7 days after each quarter ends
- End-of-period statement: due at year end
- Final declaration: replaces the old “tax return”
📌 Example: If your first quarter ends 30 June 2026, your first digital update will be due by 7 August 2026.
✅ 5 Simple Steps to Get Started with MTD
- Check your income — over £50,000 in 2024/25? You’re in wave one.
- Choose Xero — HMRC-approved, flexible, cloud-based, and our specialist software.
🔗 Limited Company Tax Returns - Digitise your records — move away from paper and into Xero.
- Set reminders — plan ahead for quarterly submissions.
- Work with us — at our Dorking office, we’ll handle everything so you can focus on your business.
👉 Ready to start? Book your MTD readiness review today.
Common Mistakes Surrey Business Owners Make with MTD
Making Tax Digital is designed to make life easier, but like any new system, there are pitfalls. Here are some of the common challenges we see — and how to avoid them:
- Leaving preparation too late → It’s tempting to wait until MTD is mandatory, but that often creates unnecessary stress. Starting early gives you time to adapt smoothly.
- Relying only on spreadsheets → HMRC requires MTD-compatible software. Spreadsheets can work if linked with bridging tools, but cloud accounting (like Xero) is usually much simpler.
- Mixing personal and business accounts → This can make reporting messy. Keeping everything separate ensures cleaner records and fewer headaches at tax time.
- Forgetting about new quarterly deadlines → MTD introduces extra reporting dates. Missing one means penalty points, so setting reminders early is a smart move.
- Trying to manage everything yourself → Many business owners in Surrey already juggle VAT, payroll, and day-to-day operations. Getting professional support means you stay compliant without losing focus on your business especially as Making Tax Digital for Income Tax 2026 introduces new quarterly updates..
👉 Avoiding these traps means you’ll save time, reduce stress, and keep your business running smoothly.
What About Penalties?
Penalties apply once MTD is mandatory for your group:
- Late submissions = penalty points
- Too many points = fines
- Late payments = possible interest charges
Get compliant early and avoid unnecessary costs.
🤔 FAQs About Making Tax Digital for Income Tax
- Do I still need to file a tax return under MTD?
Not in the same way.
You’ll submit quarterly updates, plus an end-of-period statement and final declaration each year. - What if I earn less than £50,000?
You won’t join in Making Tax Digital for Income Tax 2026 if your income is below £50,000
From 2027, the threshold drops to £30,000, and later it may fall to £20,000 (expected 2028, subject to legislation). - Can I still use spreadsheets?
You can’t use spreadsheets on their own — HMRC requires MTD-compatible software.
Spreadsheets can still play a part if they’re linked through bridging software, but for most people, switching to cloud accounting (like Xero) is easier.
At Smart Accountants Sussex & Surrey, we’ll work with you to find the best setup. If spreadsheets are important to your process, we’ll adapt them into a compliant system so you can stay stress-free.
- What happens if I miss a quarterly deadline?
You’ll get a penalty point. Too many = fines. Interest may also apply. - How can a local accountant help with MTD?
We take the stress away by:
- Setting up Xero for you
- Submitting quarterly updates on your behalf
- Monitoring deadlines so nothing is missed
- Keeping you compliant while you focus on your business
MTD is More Than Just Compliance
For many Surrey SMEs, MTD isn’t just a change in how you file tax — it’s an opportunity to rethink how you run your business finances.
By keeping your books digital and up-to-date, you’ll have:
- Real-time insight into cash flow (instead of waiting until year-end).
- Early warning on tax liabilities, so you’re never caught off-guard.
- A chance to put cash flow first — focusing on what money comes in and out each month, before chasing “profit on paper.”
At Smart Accountants Sussex & Surrey, we don’t just tick HMRC’s boxes. We use MTD and cloud tools like Xero to give you the numbers that matter for your growth, cash flow, and profitability.
👉 That way, compliance is covered — and you get more confidence in the bigger financial picture.
Why Work With Surrey Accountants for MTD?
MTD isn’t just about ticking HMRC’s boxes.
It’s about adopting a digital-first approach to bookkeeping.
By working with Smart Accountants Sussex & Surrey, you’ll get:
- Support face-to-face at our Dorking office
- Experts who manage all submissions for you
- Peace of mind knowing your compliance is covered
Conclusion & Next Steps
Making Tax Digital for Income Tax 2026 is coming. If you’re a sole trader or landlord in Dorking, Reigate, Redhill, Epsom, Tadworth, or anywhere across the wider Surrey area, the time to prepare is now.
At Smart Accountants Sussex & Surrey, we’ll:
- Set you up with Xero
- Manage your quarterly submissions
- Make sure you avoid penalties
👉 Contact our Surrey office in Dorking or call 01737 847 779 to book your free MTD readiness review.
