Prime Accountants highlighted that despite 864,000 sole traders and landlords being impacted by the first Making Tax Digital deadline, many people still find themselves struggling with the new bookkeeping obligations.

Good bookkeeping means keeping digital records up to date throughout the year, rather than reconstructing them shortly before a deadline.

The move towards quarterly digital updates means the days of storing receipts in a shoebox are over, as records now need to be kept in real time using HMRC-compliant software.

The firm highlights the importance for businesses to know how to do the bookkeeping properly.

Records were once able to be compiled at the end of a tax period, but MTD bookkeeping requires financial records to be continually updated on digital software.

MTD is sometimes assumed to mean filing four tax returns a year. However, the quarterly updates are cumulative summaries of income and expenses.

These include dates of transactions, amounts, expenses incurred and income received, alongside evidence such as invoices and receipts.

With four submission deadlines a year, instead of just one, the opportunities for late filing penalties have increased.

From April 2027, each missed quarterly deadline incurs one point, with a balance of four points triggering a £200 fixed penalty with each subsequent late submission.

As the MTD scope is expanding, sole traders and landlords who currently aren’t affected need to begin streamlining their financial record-keeping in preparation.

While those eligible for MTD in the current tax year must have an income over £50,000, this will drop to £30,000 for the 2027/28 tax year and then to £20,000 for the 2028/29 tax year.

Solid MTD bookkeeping is built on consistent habits and discipline that ensure digital records are accurate and deadlines are never missed. Here are some examples below:

· Records should be entered as a transaction happens – This is one of the main shifts from the bookkeeping requirements of the previous filing system. As updates are more frequent and digitised, any transactions should be registered as soon as they happen.

· Bank statements should be checked weekly – Checking bank statements every week gives you time to catch and fix mistakes before numbers are reported to HMRC.

· Transaction categories need to be reviewed – Instead of relying on your accounting software to guess the category of a transaction, these must be checked to ensure the correct information is relayed to HMRC.

· Bookkeeping roles have been set up – You might handle all your bookkeeping or outsource some work to an accountant. Where work is shared, roles need to be defined so there is no ambiguity about who handles what.

· Staying on top of rental income and expenses – For landlords with multiple properties, mixed-use expenses and multiple mortgages, poor bookkeeping habits can create MTD headaches. Creating routines to update rental income and expense records regularly can make quarterly submissions more manageable.

Paul Guise, (pictured) director at Prime Accountants, highlights the challenge faced by those who want to be organised but may struggle to do so effectively.

He said: “While these tips might help keep your bookkeeping organised, the added workload and transition towards digitisation might be too much for already busy landlords and sole traders.

If this is the case, we encourage you to reach out to a financial specialist to help keep your record-keeping compliant.”

To handle the increased record-keeping obligations, outsourcing bookkeeping and compliance work to an accountant can free up valuable time.

An accountant can ensure that compatible software is installed correctly from the outset. What suits a sole trader may not suit a landlord, so an accountant can help select and set up the appropriate software and connect bank feeds.

Accountants can also help to avoid errors in expense categories and incorrect quarterly figures, while advising on which transactions fall within MTD’s scope. As it was reported that 75 per cent of individuals used an authorised professional agent or accountant to file their first update, seeking professional help with MTD is not unusual.

Four deadlines a year, combined with ongoing record-keeping, can be a lot to manage. Speaking to an accountant can provide support with MTD filings and help ensure the requirements are met correctly.