The start of the new tax year in just over a month’s time heralds a major change in the reporting of business results by small businesses, as Making Tax Digital (MTD) is applied to Income Tax.

All VAT-registered businesses, with only very minor exemptions, have had to cope with MTD for VAT since 2022 and many for longer than that. But they were already making quarterly submissions and payments, so the change wasn’t dramatic in terms of reporting regularity; it was all about the way their records were maintained.

MTD for self-assessment changes much more than that. It will apply to all self-employed people and property landlords whose turnover in their 2024-25 tax returns was over £50,000. Next year the threshold is reduced to £30,000 income and there are plans to reduce it further still in subsequent years. You will be caught, even if your income falls below the threshold by 2026-27.

Small businesses will need to report every three months and annually

Any small business proprietor or landlord who is required to comply with MTD for self-assessment needs to keep digital records, which it will use to report business incomings and outgoings every three months. A fifth return will then be required annually to report any final adjustments, which will determine tax liabilities.

Most people have not submitted their tax returns by the end of the first quarter of the following tax year. We will, therefore, end up with the nonsense of people reporting results for part of 2026-27 before they submit their results for 2025-26.

The objections from those being told to comply start with the ‘Big Brother’ concerns of how far HMRC will eventually take this – ultimately quarterly tax payments that are automatically taken from their bank account. They complain about the potential expense of compliance in software and professional costs, as well as the unfairness of why multi-million pound corporations are exempt because they pay company tax when the smallest of businesses are bullied into complying.

I think they have a case, but it won’t do them any good.