Tax is changing, and for small businesses, self-employed individuals, and childminders, the shift to Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) is just around the corner. By April 2026, thousands of businesses will need to switch to digital bookkeeping and quarterly tax reporting. Here’s what you need to know and why preparing now is the smartest move for your business.
What’s Coming in MTD ITSA?
MTD ITSA is part of HMRC’s ongoing digital transformation, designed to make tax reporting more efficient and accurate. Currently, most sole traders and landlords submit a single Self-Assessment tax return once a year, but under MTD ITSA, this will change to:
- Quarterly updates – Businesses and landlords earning over £50,000 (from April 2026) and £30,000 (from April 2027) will need to submit income and expense updates every three months using HMRC-approved software.
- End-of-period statement (EOPS) – An annual review to finalise accounts and make any necessary adjustments.
- Final declaration – Similar to the current tax return, this will confirm tax owed for the year.
Why Switching to Cloud Accounting Now Is Smart
Rather than waiting until the last minute, switching to cloud accounting software early can help you stay ahead. Here’s why:
- Avoid the Rush – As the deadline approaches, many businesses will scramble to switch. Getting set up now means you’ll be comfortable with the software before it becomes mandatory.
- Save Time on Admin – Digital bookkeeping automates many tasks, reducing paperwork and making tax filing quicker and easier.
- Stay Compliant – MTD ITSA requires compatible software, such as FreeAgent or QuickBooks. If you’re still using spreadsheets or paper records, now’s the time to upgrade.
- Better Financial Insights – Real-time access to your income and expenses allows for better financial decisions throughout the year.
How MTD Affects Childminders & Small Businesses
For childminders, MTD ITSA means keeping accurate, up-to-date digital records of income and expenses. Many childminders currently rely on paper records or basic spreadsheets, which won’t be compliant under MTD rules. Some key points to consider:
- If your annual income exceeds £50,000 in 2026, you must comply.
- From 2027, the threshold drops to £30,000, meaning more childminders will be affected.
- Cloud software can automatically categorise expenses like food, toys, and home use, making tax reporting simpler.
- Quarterly reporting may mean setting aside tax more frequently, ensuring you’re not caught out by a large bill at the end of the year.
Get Ready Now
At Childminder Accountancy Services, we are already helping clients transition to cloud-based software to ensure they meet MTD ITSA requirements smoothly. If you’re unsure about which software to use or need help getting started, now is the perfect time to make the switch.
Need help preparing for MTD? Get in touch today to future-proof your business!