Whether you’re a full-time freelancer, running a side hustle or letting out property, 2026 is shaping up to be a pivotal year for tax. From April 2026, Making Tax Digital (MTD) for Income Tax will start applying to those with a gross income over £50,000+, marking the next step in HMRC’s shift to fully digital tax systems.
But even if you’re not yet required to submit quarterly updates, now’s the perfect time to get organised and prepare for the future.
Why 2026 matters for everyone
MTD is rolling out gradually. First, for those self-employed individuals and landlords who earn over £50,000. Then, in April 2027 for those earning over £30,000 and in April 2028 it will include any sole traders and landlords earning over £20,000.
The direction is clear: digital recordkeeping and automated tax submissions are here to stay. And even if you don’t meet these thresholds yet, adopting MTD-ready habits now will give you a head start – and less stress later.
Research shows that 1 in 3 UK sole traders still rely on paper records or spreadsheets leaving them at risk of lost receipts, miscalculations and last minute panic when MTD does apply to them.
Common misconceptions about MTD software
Many people assume that using MTD-compliant software means they must submit quarterly updates immediately. But that’s not true. Even if MTD doesn’t apply to you, you can use software to:
- Manage your finances digitally
- Track expenses, income and receipts
- Categorise transactions for easier reporting
In other words, you can enjoy the benefits of better organisation without having any MTD responsibilities.
What you can do now – regardless of eligibility
- Centralise your finances: Digital software allows you to combine bank transactions, receipts, income and expenses into one handy platform. This gives you greater insights and control and means you can easily retrieve information when needed. Whether it’s for MTD compliance, VAT or other general finance management, this will save time and reduce errors.
- Build consistent habits: Even if you’re not required to submit quarterly updates via MTD, reviewing your finances every three months helps you to spot missing receipts, track cash flow, identify tax liabilities and fix any mistakes. All of this can make your tax submission much less stressful.
- Reduce errors before they happen: Manual bookkeeping can lead to mistakes. Think misfiled receipts and missing transactions. Digital tools, however, can flag these issues automatically and reduce the chance of any mistakes leading to penalties.
- Leverage automation: MTD-ready software like Coconut offers automated categorisation of transactions and receipt scanning and storage. Not just that but seamless bank feed integration means you can benefit from real-time updates. This automation reduces your manual entry and gives you greater peace of mind and confidence that your records are accurate.
- Gain insights into your business: Beyond compliance, using digital tools can help you plan for the future. You can easily spot trends in income and expenses and see cash flow in real-time. Ultimately, this will help you to make better decisions for business growth.
Why getting ready now pays off
Even if MTD isn’t mandatory for you yet, taking small steps now such as investing in compatible software comes with more than one benefit:
- You’ll spread the onboarding process and learning curve over a few months
- You’ll reduce the stress of your annual tax submission
- And you’ll improve business insights and cashflow management
Put simply, starting now means you can adapt gradually, testing new workflows and tools before it becomes mandatory.
Key takeaways
- MTD is coming. The £50,000 threshold kicks off in April 2026 and it will drop over the next two years.
- Digital records are beneficial now and will become essential. You don’t need to submit MTD updates yet to start organising your finances digitally.
- Automation saves time and reduces errors. Receipt scanning, bank feeds and transaction categorisation makes bookkeeping simpler.
- Quarterly checks are smart. Even before MTD applies to you, reviewing your finances every quarter improves accuracy and gives you better insights.
- Choose software built for the self-employed. Tools like Coconut are designed to be MTD-ready and grow with your business.
2026 is your opportunity to take control of your finances – whether MTD applies yet or not. And by adopting digital tools early, you won’t just be compliant but you’ll be running your business smarter.
Explore Coconut today and gain clarity on your money and future-proof your business at the same time.