Introduction
As of April 2026, Making Tax Digital (MTD) for Income Tax enters its first phase-in period. Businesses and landlords with combined income from self-employment or property exceeding £50,000 must now maintain digital records and submit quarterly updates to HMRC. This marks a significant shift in UK tax compliance, aimed at reducing errors and improving real-time reporting.
ICAEW’s latest tax news brief (31 March 2026) highlights this alongside strengthened tax software standards and consultations on stablecoin taxation. For CFOs in PE-backed firms or turnaround situations, understanding these changes is critical to avoid penalties and optimise cash flow.
Who is Affected?
The £50k threshold applies to combined gross income from:
- Self-employment (trades, professions)
- Property rentals
Next year (April 2027), it drops to £30,000. Exemptions exist for ‘limited capacity’ traders, but most SMEs must comply.
Digital Record Requirements
Records must be digital (software or spreadsheets linking to commercial software). Key data:
- Income and expenses
- Quarterly summaries (Total Income, Total Expenses, Taxable Income)
No need for transaction-level detail initially, but full digitalisation is the goal.
Quarterly Updates
Four updates per year, due 12 months after tax year end (e.g., 31 Jan 2028 for 2026/27). First deadline: 31 Jan 2028.
End-of-year Self Assessment remains, reconciled against updates.
New Tax Software Standards
HMRC is enhancing oversight of software providers to cut errors. Expect validated MTD-compliant tools only. CFOs: Audit your stack now.
Stablecoins and Crypto Tax Consultation
Government seeks views on treating certain stablecoins as CGT-exempt. Relevant for PE funds holding digital assets or distressed crypto plays.
CBAM Updates
Carbon Border Adjustment Mechanism tightens for importers. CFO practical: Model impacts on supply chains in M&A due diligence.
CFO Practical Advice
Immediate Actions:
- Assess income thresholds across portfolio companies.
- Select MTD-ready software (e.g., Xero, QuickBooks with updates).
- Train finance teams on quarterly processes.
- Review property portfolios for threshold breaches.
In turnaround scenarios, MTD can expose cash flow issues early—use it for better forecasting.
For PE: Factor compliance costs into carry waterfalls and exit planning.
Penalties and Risks
Late updates: £100-£300 per quarter initially. Repeated failures escalate. HMRC’s agent support lines are overwhelmed—proactive compliance key.
Conclusion and CTA
MTD IT is here. Non-compliance risks fines and HMRC scrutiny. Tanous Limited specialises in tax optimisation for PE, M&A, and distressed assets.
Contact mark@tanous.co.uk for a free compliance audit.
Mark Hendy, CFO Advisor, Tanous Limited