Chiswick is one of the pockets of London that will be most affected in the biggest HMRC tax shakeup of our times

Has HMRC fully explained the impact?

HM Revenue and Customs is rolling out Making Tax Digital for Income Tax, and many taxpayers are likely to be caught out by rules that diverge dramatically from the old system, say tax experts

The biggest change of the tax system in a generation is sure to impact Chiswick’s self-employed creatives working in music, design, media and film. It will also have consequences for our many self-employed practitioners in the legal, health and well-being sectors.

In addition, there will be significant numbers of individuals with property income who are now required to register for Making Tax Digital (MTD).

Responsibility to comply

All affected sole traders and landlords should have received a letter, but if you didn’t see this or it got lost in the post, it is still your legal responsibility to comply.

Even if you do not have a large enough turnover now, the threshold of £50,000 gets dramatically lower each year so most people will be brought into the new tax system eventually (see If not now, when).

MTD currently does not include companies or partnerships, but partnerships will be required to join at a later date. Employees, pensioners and individuals without self employment or rental income remain outside the scope.

It’s already happening

Records for the first quarter, 6 April 2026 to 5 July 2026, must be submitted by 7 August 2026, which means that data goes to HMRC almost in real time.

Anyone who has filed a tax return will know the feeling of dread, so this revised deadline is likely to add extra stress – and it’s happening four times a year instead of just once!

So, the usual January scramble to work out income and expenditure – always a nightmare if you’ve not got your paperwork in order – may be a thing of the past. For many freelancers, sole traders and small businesses, the thought of more reporting is enough to bring on a major panic attack.

Paper receipts can be discarded if using a digital accounting system

What is Making Tax Digital?

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) refers to HMRC’s new digital system for recording and reporting taxpayers’ income and expenditure. The bit that’s tough to swallow is that it requires a quarterly update instead of the usual yearly submission.

Even more alarming, simple spreadsheets (and other paper records) are no longer acceptable because taxpayers (or their accountant or bookkeeper) will now need to use MTD-compliant software such as Xero, Sage, QuickBooks, Clear Books or FreeAgent to send that update.

READ MORE: Check out HM Revenue and Customs guidance in full.

Free advice on MTD is available from the Low Incomes Tax Reform Group; image LITRG

Is it a burden too far?

“It’s a damn nuisance,” said John Ward of Princecrest Ltd, a small tax advisory firm in Chiswick, who believes that MTD is a burden too far for the self-employed with low incomes.

“Accountants and bookkeepers will have to charge for collating extra information and with greater regularity. They will also have to cover the cost of the software.”

He feels strongly that for anyone with a tiny turnover, who only raises 20 invoices a year, it is an unfair process.

Too much screen time

One local creative said:

“I enjoy sitting with a pile of receipts and my calculator. I do not want to add more screen time – either on my phone or a computer – to my life, so I feel that HMRC is wringing all the pleasure out of my little enterprise. Honestly, I think I might just stop creating and get a PAYE job in an office!”

READ MORE: The Low Incomes Tax Reform Group offer helpful advice.

Digital software – such as QuickBooks – isn’t expensive for a basic package and is an allowable expense

Will it increase DIY accountancy?

You could, of course, save money by doing the bookkeeping yourself and buying software to suit a simple business can cost as little as £7 to 11 a month, but not all people are going to love inputting data.

Every transaction will need to be categorised as sales, expenses or drawings (ie. personal spending). Any entries labelled as drawings would automatically be filtered out from digital updates going to HMRC, but labelling every purchase that’s not a work expense (eg. a takeaway coffee) is fiddly.

Technology is your friend

If you are filing the returns yourself, opening a separate current account that is exclusive to your business could simplify categorisation. Your new software can link to that account and import transactions as they occur, avoiding time-consuming data input.

HMRC offers online guidance on which software to use, but if you are resolutely wed to your spreadsheets you could opt for bridging software that links these and carry on manually inputting.

READ MORE: to assess which software you need, go to HMRC’s online quiz.

A more professional system

In the long run, spreading the workload over the entire year instead of saving it up to one final deadline is a more professional way to manage your business.

“It doesn’t have to be stressful,” said Charlie Carne & Co, a Chiswick-based chartered accountant who is an MTD pro-advisor.

“You should not worry if you make any errors in your quarterly updates as these are easily fixed in subsequent filings and will not be penalised,” he explains, “if businesses are recording their tax digitally and filling it quarterly as best as they can.”

Taxpayers will still do a full final tax return, which does have to be accurate, but because digital records have already been created and categorised it will make filing that information at the end of the year much easier.

Use HMRC’s step-by-step online guide to sign up

A positive learning experience

HMRC is expecting MTD to be a learning experience and, in the first year, there will be no penalties, allowing taxpayers time to get used to digital accounting.

The critical thing is to be aware of the precise date for each quarterly update and put reminders in place to review your information before you hit send. Or hire an accountant to guide you through it.

“What I’ve found with my clients,” said Carne, “is that business owners see issues as they arise and before they become major ones. It means, for example, that you’ll notice a non-paying customer earlier.”

“It allows businesses to have more stability and know their liabilities. It’s healthy to know your numbers.”

If you don’t, however, get into a regular pattern of reporting now, then it could be challenging in future when there will be penalties for late submissions – and these can compound quickly.

How can I prepare?

Firstly, you need to know if you are affected. If you were registered for self-assessment for 2024-25 and you reported gross self-employment and/or property income of more than £50,000, then you will need to send your very first quarterly update on 7 August.

“If your accountant hasn’t already talked to you about MTD, then it’s important that you have that conversation soon,” said Carne. “And, if you don’t have an accountant consider if you need help.”

“All modern accountants will be able to advise and will have been using digital systems for their VAT-registered clients since 2019.

“Yes, you’ll be interacting with your accountant more often and that extra time, plus the additional hours for set-up, will increase the bill, but if business owners allow themselves to be set up correctly it should only be a small increase.”

If not now, when?

It’s important to understand that the threshold will fall further still, involving many more of the self-employed and landlords in MTD.  On 6 April 2027, it will fall to £30,000 turnover in 2025-26 and on 6 April 2028 to £20,000 turnover in 2026-27. And that’s gross not net income!

“I wouldn’t waste time getting set up on the software until you need to,” advised Carne, but if you’re expanding your business – as most workers strive to do – it’s wise to be mentally prepared and plan for change.

Those who rent property are more likely to be affected

Landlords take note

Importantly, income from property rental must be added into the annual threshold figure, yet it is not combined in the quarterly updates. HMRC are expecting separate quarterly MTD updates for rental income and self-employed income.

“Chiswick – like many affluent areas of London – has more landlords than the rest of the country, so this is where our local area will be most impacted by the tax shake up,” said Carne.

Anyone who is a landlord in a W4 postcode only needs a single property (given that rents are well over £1,000 a week for a modest three-bed terrace) to meet the £50,000 threshold.

Exemptions on a case-by-case basis

If you can’t access the internet – probably not an issue in Chiswick – or belong to a religious order which forbids digital communication, then you can apply to HMRC for an exemption. Also, if you have a disability or an age-related issue, you may be able to obtain one.

READ MORE: For a full list of exemptions, check out MTD guidance on Gov.uk.

Digital accountancy could lighten the workload for a freelancer if set up right

Taking care of business

Anybody who sets up a business now will not qualify for MTD for a couple of years, but choosing the right bank account from the outset will make it easier to comply in the future.

Digital banking brand Mettle offers a free business account for sole traders and landlords that comes with FreeAgent accounting software, allowing you to be MTD-compliant from the get-go.

“HMRC haven’t helped themselves in the way they’ve presented this rollout,” concluded Carne. “But it is simply the government forcing business to keep all their transactions in digital format in real time throughout the year.”

He is probably not the only accountant who will breathe a sigh of relief to see the end of bags full of receipts.

Time will tell if MTD helps businesses to thrive.

For MTD advice from Charlie Carne & Co, click here.