Making Tax Digital for Income Tax is expanding from 6 April 2026. If your business is within scope, HMRC now requires digital record-keeping and quarterly submission of tax summaries through compatible software. For many SMEs, this means reviewing whether the IT systems already in place can support the new requirements — or whether adjustments need to be made before the deadline.

This is not about new tax rates. It is about how you collect, store, and report the data HMRC expects to see. The practical question for SME owners is whether your current systems will carry the load.

What is changing in April 2026?

Making Tax Digital was introduced in stages. The first phase covered VAT-registered businesses with income above the VAT threshold. The second phase, arriving in April 2026, extends the requirement to income tax for businesses and landlords whose annual taxable income exceeds £50,000. Those with income between £30,000 and £50,000 will follow in April 2027.

The core requirements are straightforward:

• Keep digital records of income and expenses

• Use compatible software to compile those records into a digital link

• Submit quarterly summary updates to HMRC

• Provide an end-of-term declaration once the full tax year is complete

This replaces the current Self Assessment process where most businesses maintain records in spreadsheets or paper and submit a single annual return.

Do your current IT systems meet the new requirements?

Most SMEs already use software for accounts, payroll, or invoicing. The question is whether that software has been verified as compatible with HMRC's Making Tax Digital requirements for Income Tax.

HMRC maintains an official list of compatible software providers. You do not need to replace your existing systems if they are already on that list — but you do need to confirm compatibility and activate the required digital links between your records and HMRC's systems.

This is a practical review that many SMEs can complete internally if they know where to look. The alternative is waiting until January and discovering that the software you assumed would work does not support the new quarterly submission requirement.

Checking your existing software stack

Start by identifying which tools handle your income records and expense tracking. This may be:

• An accounts package such as QuickBooks, Xero, or FreeAgent

• A payroll system that feeds into your financial records

• A combination of spreadsheets and manual processes

For each tool, verify that it appears on HMRC's published list of compatible MTD for Income Tax software. If it does not appear, you will need to integrate a bridging tool or migrate to compatible software before April 2026.

Data flow and digital links

The term "digital link" sounds technical but simply means that data moves between systems without manual re-entry. If you currently copy figures from one spreadsheet into another, that breaks the requirement. The data path must be automated end-to-end from source record to HMRC submission.

Review how your current systems connect. If you have a standardised device build across your team and consistent software licensing, this review tends to be straightforward. If you have ad-hoc setups where different departments use different tools, the gaps will show up quickly.

What happens if you are not ready?

HMRC has indicated it will take a proportionate approach to early non-compliance. There are no immediate fines for missing the April 2026 deadline, but the expectation is that businesses make reasonable efforts to comply.

The practical risk is not the penalty — it is the operational disruption of scrambling to get systems in order when you should be focused on running your business. Getting this right before the deadline means you avoid the January rush and the likelihood of errors in your first quarterly submission.

How Infinite Cloud IT can help

We work with owner-managed SMEs across Sussex and Kent who need clarity on their IT systems without unnecessary complexity. If you are unsure whether your current setup meets the April 2026 requirements, a focused review can identify what needs to change and what already works.

The Security Triage Baseline Review includes a check on your software stack and compliance posture. It is a practical starting point if you want to understand where you stand without committing to a full project.

We also help businesses standardise their Microsoft 365 device builds, which often means consolidating the tools that handle financial data into compatible, centrally managed systems. And for SMEs in Kent looking at endpoint protection as part of their broader compliance review, the same principles apply: know what you have, verify it works, fix gaps before they become problems.

Frequently asked questions

Does MTD for Income Tax apply to my business?

If your annual taxable income from self-employment or property rental is above £50,000, you will need to comply from April 2026. If your income falls between £30,000 and £50,000, the deadline is April 2027. Income below £30,000 is not currently in scope.

Do I need to buy new software?

Not necessarily. If your existing accounts or invoicing software is on HMRC's compatible list, you can activate the required digital links within that tool. You only need additional software if your current systems are not compatible and cannot be bridged.

Can I still use spreadsheets?

You cannot maintain your core records in spreadsheets and meet the digital link requirement. Spreadsheets can supplement compatible software, but they cannot serve as the primary record-keeping tool under MTD for Income Tax.

What counts as a quarterly submission?

You will submit four summary updates during the tax year, covering each quarter's income and expenses. The exact format depends on your chosen software, but the requirement is consistent: HMRC receives a summary of your figures at regular intervals rather than a single annual return.

When should I start reviewing my systems?

Now is the appropriate time. There is no penalty for early preparation, and starting in April gives you several months to test your systems, resolve compatibility gaps, and train staff before the deadline.