Making Tax Digital: 13 Days to Go — Is Your Hospitality Business Ready?

What Is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's plan to move the UK tax system online. You may already be familiar with MTD for VAT, which has been in place since 2019. Now, HMRC is extending the same approach to Income Tax Self Assessment.

In simple terms, it means you'll need to keep digital records of your income and expenses and submit quarterly updates to HMRC using compatible software — instead of filing a single annual Self Assessment tax return.

Who Does It Affect?

From 6 April 2026, MTD for ITSA applies to:

• Sole traders with annual gross income over £50,000
• Landlords with annual property income over £50,000

From April 2027, the threshold drops to £30,000, bringing even more businesses into scope.

If you're a hospitality business owner operating as a sole trader — running a restaurant, pub, café or B&B — and your turnover exceeds £50,000, this applies to you.

What Changes in Practice?

Under MTD for ITSA, you'll need to:

• Keep digital records — no more shoeboxes of receipts or manual spreadsheets (unless the spreadsheet links to compatible software)
• Submit quarterly updates — summaries of your income and expenses sent to HMRC every three months
• Submit an End of Period Statement (EOPS) — confirming your figures are complete for the tax year
• Submit a Final Declaration — replacing the traditional Self Assessment tax return

Why This Matters for Hospitality

Hospitality businesses are uniquely affected because:

• High transaction volumes — daily cash and card sales, supplier invoices, staff costs. Keeping all of this digitally organised is a bigger task than in many other industries.
• Seasonal fluctuations — quarterly reporting means HMRC will see your numbers in real time, including quiet months. Understanding how to present seasonal patterns is important.
• Mixed income streams — if you own the property and trade from it, you may have both trading and property income to report separately.
• Cash-heavy operations — pubs, cafés and takeaways often handle significant cash. Digital record-keeping needs to capture this accurately.

What You Need to Do Now

With just 13 days to go, here's your action plan:

1. Check if you're in scope

If your gross self-employment or property income exceeds £50,000, you're in the first wave. Not sure? Check your last Self Assessment return or ask your accountant.

2. Choose MTD-compatible software

You'll need software that can connect to HMRC's systems. Popular options include Xero, QuickBooks, FreeAgent and Sage. HMRC maintains a list of compatible software on their website. If you're already using cloud accounting software for MTD for VAT, check whether it also supports ITSA.

3. Get your records digital

If you're still using paper records or basic spreadsheets, now is the time to move everything into your chosen software. Start with your current tax year's records so you're ready for the first quarterly submission.

4. Understand the quarterly deadlines

Your first quarterly update will cover 6 April – 5 July 2026, due by 5 August 2026. Mark these dates in your diary now:

• Q1: 6 Apr – 5 Jul → due 5 Aug 2026
• Q2: 6 Jul – 5 Oct → due 5 Nov 2026
• Q3: 6 Oct – 5 Jan → due 5 Feb 2027
• Q4: 6 Jan – 5 Apr → due 5 May 2027

5. Talk to your accountant or FD

This is a significant change to how you report your finances. If you don't already have someone helping you with your numbers, now is the time to get support. An experienced Finance Director can help you set up the right systems, ensure your records are accurate and take the stress out of quarterly reporting.

Penalties for Non-Compliance

HMRC has confirmed a points-based penalty system for late submissions. Each late quarterly update earns a penalty point. Once you hit the threshold (4 points for quarterly obligations), you'll receive a £200 penalty — and further penalties for each subsequent late submission.

Late payment penalties also apply, starting at 2% of the tax owed after 15 days, rising to 4% after 30 days, with ongoing daily charges after that.

The Silver Lining

It's not all bad news. Quarterly reporting actually gives you a much better handle on your finances throughout the year. Instead of one big scramble at year-end, you'll have a regular rhythm of reviewing your numbers — which is exactly what we encourage all our hospitality clients to do anyway.

Think of it as forced good practice. The businesses that embrace MTD and use it as an opportunity to get closer to their numbers will be the ones that thrive.