Making Tax Digital: Your questions answered

Making Tax Digital (MTD) is HMRC’s initiative to modernise the tax system by requiring certain businesses and landlords to keep digital records and submit quarterly updates using approved software.  

From April 2026, these rules will apply to individuals with business or property income over £50,000 per year. Preparing early means less stress, smoother compliance, and more time to focus on what matters most. 

We recently hosted our first of a series of three Making Tax Digital webinars alongside our partners at Xero. The webinar covered key topics such as what is changing, who it is going to affect, and how best to prepare. 

It was a highly engaging session which included questions from participants sparking further discussion, so much so we have gathered the most common themes and answered them below: 

Q. I’m a sole trader (locum medical) and landlord, should I open a business account for Xero?

A. While this question requires specific guidance, there are definitely benefits to having a separate business bank account for any sole-trader.

This is because you can ring fence your business transactions to see your income and outgoings more easily.

Q. As a sole trader, if I open a business account, do I need to pay for all business purchases through that account for MTD to work?

A. To keep everything neat and tidy, you would ideally open a business bank account which is used for all trade activities. Effectively this means that you would pay for business related purchases and receive business related income through this bank account.  

This is the best way to simplify the tracking of your business income and expenses when Making Tax Digital for Income Tax comes into effect. 

Q. I don’t have a business bank account and don’t want to issue invoices. Can I just submit digital returns directly to HMRC each quarter? 

A. No. Making Tax Digital for Income Tax requires digital record keeping and quarterly submissions through approved software, such as Xero.

You cannot submit directly via HMRC’s website, but we can provide a bridging software tool to use if required.

A business bank account is not mandatory, but digital record keeping is.

Q. Are all business bank accounts acceptable to Xero?

Most bank accounts can be set up with Xero’s bank feed functionality, though there are a few less used bank accounts which don’t support this integration.

Q. Can Affinia provide ad hoc 1:1 training or consultation on using Xero?

A. Yes. We offer tailored one-to-one Xero training and consultations to help you manage your records and stay compliant with Making Tax Digital.

Q. If my letting agent uses Xero and manages my rent, can they submit quarterly update for me?  

A. No, they can’t submit updates on your behalf. Only you or an authorised tax agent can file Making Tax Digital submissions.

However, your agent can assist with record keeping, and we can work with their records to complete the required filings.

Q. Is it an issue if rent is paid into my personal account?

A. Not for Making Tax Digital purposes. You can use a personal account, but you must maintain clear digital records that reconcile rental income and expenses. A dedicated account is recommended for simplicity, but not required. 

Q. Does owning a holiday let count as being a landlord for Making Tax Digital? 

A. Yes. As the furnished holiday let regime ended on 6 April 2025 and this income is now treated as standard property income. If your property income exceeds the threshold, it will fall within the scope of Making Tax Digital for Income Tax.

Q. Does the Tap to Pay option incur a transaction charge like SumUp?

A. Yes, Stripe fees do apply. However Xero’s surveys have shown that 95% of customers prefer paying by card rather than bank transfer so it’s important to give your customers flexible ways to make payment like with Tap to Pay.

Q. How much will it cost if I do it myself, use Affinia for support, or ask Affinia to handle everything? 

A. We offer several options based on your technical ability and how much you want to do yourself. Our support is tailored to three categories:

• Do it for me
• Do it alone
• Do it with me

Each option of support has different price points and levels of training and assistance. You can discuss which level of support works for you with one of our Making Tax Digital champions.