By James W. Melhuish DipPFS EFA
Director, Pocknells Wealth Management
I have always thought that the most useful financial planning conversations happen when the figures are current, rather than twelve months old.
That is one reason Making Tax Digital for Income Tax matters beyond bookkeeping. It is now live for many higher-income sole traders and landlords, and the next group is due to enter from April 2027. The immediate responsibility sits with the client and their accountant, but the move towards more regular records may also improve decisions about tax reserves, pension contributions, investment and retirement.
It will not do that automatically. A quarterly update is not a completed tax return, and an estimated tax figure is not the same as a final liability. Used properly, however, the information can help clients make fewer decisions in the dark.
What is already in force?
Making Tax Digital for Income Tax became mandatory on 6 April 2026 for sole traders and landlords whose total qualifying income from self-employment and property was more than £50,000 in the 2024/25 tax year.
Qualifying income means gross income before expenses. It combines income from self-employment and property, so a client may cross the threshold even where no single activity produces more than £50,000.
Those within the rules must keep digital records using compatible software, send quarterly summaries of income and expenses to HMRC and submit their annual tax return through that software. The quarterly submissions are summaries, not four additional tax returns, and clients do not need to make every accounting or tax adjustment before sending them.
For most clients, the first quarterly deadline was 7 August 2026 and the next is 7 November 2026. HMRC has confirmed that it will not apply penalty points for missed quarterly update deadlines during 2026/27, although digital records and the updates are still required. The normal consequences for a late annual return or late payment continue to apply.
Who enters next?
The timetable is confirmed. Clients with qualifying income above £30,000 in 2025/26 will be required to use Making Tax Digital from 6 April 2027. The threshold then falls to more than £20,000 from 6 April 2028, based on qualifying income in 2026/27.
This means the 2025/26 Self Assessment return is not simply a record of the year that has ended. For some clients, it will determine whether they enter the system next April. HMRC has said it will begin issuing awareness letters in autumn 2026 to people with qualifying income above £30,000 after their 2025/26 return is submitted.
Some people can apply for an exemption, including where age, disability, remoteness or another reason makes it unreasonable or impractical to use digital tools. An exemption should not be assumed, and it is HMRC that decides whether the conditions are met.
Why this matters to financial planning
- Tax reserves. A developing estimate may help the client set aside cash progressively rather than face the annual bill with too little liquidity.
- Pension contributions. Better information about profits and taxable income can support an informed discussion about affordability, annual allowances and whether a personal or employer contribution is appropriate.
- Investment decisions. A client can separate money needed for tax, working capital and near-term spending before committing surplus cash to a longer-term investment.
- Retirement planning. A sole trader or landlord approaching retirement may be able to model income, tax and pension withdrawals with more up-to-date figures.
- Protection and resilience. Regular records can expose irregular income, weak cash reserves or excessive dependence on one property or business activity earlier.
The accountant remains central
I do not see Making Tax Digital as a reason for a financial planner to stray into the accountant’s work. The opposite is true.
The accountant understands the quality of the records, the adjustments still to be made and the difference between the developing estimate and the likely final position. That context matters before a client changes pension funding, invests cash or decides what can safely be drawn from a business or property portfolio.
At Pocknells Wealth Management, we work alongside the client’s accountant and support the relationship you already have. We are not looking to replace your role. Our job is to take reliable financial information and connect it to the client’s longer-term objectives, cashflow and appetite for risk.
The opportunity is not to turn every quarterly update into a financial review. It is to identify the moments when a material change in profit, income or available cash should prompt a conversation.
Questions worth raising with clients
- Does the client know whether their combined gross self-employment and property income brings them within the rules?
- If they are already mandated, are digital records and quarterly updates operating properly?
- If they are likely to enter from April 2027, have software, record-keeping responsibilities and costs been discussed?
- Does the client understand that quarterly updates are not final tax returns and that estimates may change?
- Is enough cash being retained for tax, working capital and emergencies?
- Could current information improve a pension contribution or retirement decision before the tax year ends?
- Is money being invested that may actually be needed for tax or the business within the next few years?
- Would a short accountant and financial planner review help connect the figures to the client’s wider plan?
The conclusion
Making Tax Digital is primarily a change to record keeping and reporting. It should not be oversold as a financial planning solution, and it does not remove the need for proper year-end work.
It can, however, improve the timing of decisions. When clients and their advisers have a clearer view of income and expenses during the year, they can plan tax reserves, pension funding and longer-term investment with fewer surprises.
For accountants, the next practical step is to identify clients who are already within the system and those likely to enter in April 2027. Where the figures reveal a meaningful planning issue, an early joined-up conversation may be far more valuable than waiting until the annual return is complete.
Planning Points with Pocknells
If you have a client whose income, pension funding, investments or retirement plans may benefit from a joined-up review, we would be pleased to offer a complimentary Planning Points with Pocknells session.
We can explore the financial planning considerations with you and your client, identify where regulated advice may add value and agree how we can support your existing relationship.
Important information
This article is for general information only and does not constitute financial, tax, accounting or legal advice. Tax treatment depends on individual circumstances and may change. Business, agricultural and estate-planning decisions should be made with appropriate professional advice. Where investments or insurance solutions are considered, their suitability will depend on the client’s circumstances. The value of investments can fall as well as rise, and clients may get back less than they invest.
