MTD – What Do I Need To Do First – A Performer’s Guide

Hello, and welcome back to another Making Tax Digital for Income Tax video. If you’ve watched the previous two videos, the next question is – what should you be doing now?

If you do nothing else, there are three things you really should consider.

The first is to separate your bank accounts.

If you don’t have a dedicated bank account for your self-employment or landlord income, you’re going to make life harder for yourself.

It might feel like extra effort at first, because you’ll need to transfer money from your business account into your personal account to cover things like rent, mortgage, or bills.

But you can do that in one simple transaction each month.

For example, if you know your personal costs are around £1,000, you can transfer that amount once at the start of the month. This makes everything much clearer from a tax and accounting perspective.

If all your business income and expenses go through one account, you don’t need to review every single transaction to find the business ones.

If you’re dealing with 200 transactions a month and only 20 relate to your business, that’s a lot of wasted time.

The cleaner the setup, the easier everything becomes.

The second step is to pick a system.

This could be a spreadsheet with bridging software, or a tool like Xero, FreeAgent, Zoho, or another similar solution. The key is not to overthink it. Choose something that works for you.

However, you do need to consider how your income works.

For example, if you take deposits for weddings or events, you need to think about how those are recorded. If a deposit is refundable, you may not want to treat it as income straight away. In that case, you could record it separately as revenue in advance, so it’s handled correctly at the year end.

So while the system doesn’t need to be perfect, it does need to fit how you work.

The third step is to start recording your income and expenses.

Ideally, you should start from April.

If your qualifying income is over £50,000, Making Tax Digital will apply from April 2026.

If it’s over £30,000, it will apply from April 2027. Even if you’re not required to comply yet, it’s a good idea to start early and get used to the system.

That way, when MTD does apply to you, you’re already comfortable and everything is in place.

So if you take nothing else away from this video, focus on these three things:

Separate your bank account
Choose your system
Start recording early

If you’d like help setting this up or making sure you’re on the right track, feel free to get in touch.