What Pub & Bar Owners Need to Know About Making Tax Digital for Income Tax
Running a pub or bar is relentless. The last thing you need is a new administrative burden on top of everything else. That’s why many publicans are feeling the pressure about Making Tax Digital, HMRC’s new scheme for how you manage your income tax.
Making Tax Digital for Income Tax (MTD for IT) is the biggest shake-up to the UK tax system since Self Assessment launched more than 30 years ago. More than 860,000 sole traders and landlords are affected, and many in the licensed hospitality trade will be among the first in line.
Fortunately, it’s not as daunting as it sounds. If you’re already a Carroll’s client, the biggest change is that you need to have your bookkeeping up to date four times a year instead of leaving it to the end. Here’s everything you need to know.
What Is Making Tax Digital for Income Tax?
MTD for Income Tax is HMRC’s move away from the traditional once-a-year Self Assessment tax return. Instead of pulling everything together in January, you’ll keep digital records of your income and expenses throughout the year. Carroll’s will send quarterly summaries to HMRC directly from approved software on your behalf.
Think of it less like doing your tax return four times a year, and more like keeping a running tally that Carroll’s pulls from your software quarterly. We’ll still submit one tax return at the end of the year, and you still pay your tax bill on 31 January.
Once the new MTD rules come into force, you can no longer use the HMRC online portal or submit your tax return by paper. Instead, everything must be done digitally through software. If you currently file your tax return online, this is a significant change.
In short, there are three things you’ll need to do:
- Use recognised software to record your income and expenses as you go
- Send quarterly updates to Carroll’s from that software so we can file your quarterly summary with HMRC.
- Submit your information to us so we can file your annual tax return.
When Will MDS Affect You?
Whether (and when) MTD applies to you depends on your qualifying income: that’s your total turnover from self-employment and property combined, based on your most recent tax return.
HMRC is rolling this out in phases:
- 6 April 2026 — if your qualifying income from the 2024/25 tax year was above £50,000
- 6 April 2027 — if your qualifying income from the 2025/26 tax year is above £30,000
- 6 April 2028 — if your qualifying income from the 2026/27 tax year is above £20,000
For many sole trader pub and bar owners, that first wave on 6 April 2026 is already here. If you turned over more than £50,000 last year, you should have received a letter from HMRC.
One important note: HMRC won’t sign you up automatically. You need to register yourself, or ask your accountant to do it on your behalf. If you haven’t signed up yet, now is the time to act.
What If You Earn from Both Your Pub and a Rental Property?
If you earn income both from running your pub and from renting out property (perhaps a flat above a previous business, or an investment property) you’ll need to keep separate digital records for each income stream and submit separate quarterly updates for each.
HMRC will combine both into a single end-of-year tax return, so the overall process stays familiar. It’s just the record-keeping that needs to be separated.
What Do Quarterly Updates Actually Mean in Practice?
The quarterly updates are not tax returns. They’re just four short summaries a year, pulled from your digital records, showing your income and expenses for that period. Your software does the heavy lifting without the need to fill in lengthy forms.
The standard quarterly deadlines align with the tax year and look like this:
| Period | Deadline |
| 6 April – 5 July | 7 August |
| 6 April – 5 October | 7 November |
| 6 April – 5 January | 7 February |
| 6 April – 5 April | 7 May |
If your accounting period ends on 31 March, you can opt to align your quarterly updates to the calendar year instead, which may make your record-keeping simpler.
The first MTD tax return, covering the 2026 to 2027 tax year, will be due by 31 January 2028.
Choosing the Right Software
You’ll need to use HMRC-recognised software to keep your records and submit your quarterly updates.
At Carroll Accountants, we’re Xero Gold Partners, and for many of our pub and bar clients, Xero is our recommended solution. It’s built for businesses like yours because you can capture receipts on your phone, track income and expenses in real time, and send your quarterly updates to HMRC directly from the platform.
That said, the right software depends on your business and how you work. We’re happy to talk you through the options and help you find the best fit.
Key Dates to Keep in Mind
Here’s a simplified timeline for those who need to start from 6 April 2026:
- 31 January 2026 — Submit your 2024/25 Self Assessment tax return as normal
- 6 April 2026 — Start keeping digital records using MTD software
- 7 August 2026 — Deadline for your first quarterly update
- 7 November 2026 — Deadline for your second quarterly update
- 31 January 2027 — Submit your 2025/26 Self Assessment tax return as normal (the last year you’ll do it the traditional way)
- 7 February 2027 — Deadline for your third quarterly update
- 7 May 2027 — Deadline for your fourth quarterly update
- 31 January 2028 — Submit your first full MTD tax return, straight from your software
Don’t leave sign-up until the last minute. Getting your software set up and your records in order before 6 April will make the whole process far less stressful.
What Happens if You Miss a Deadline or Make a Mistake?
First of all, don’t panic. HMRC is introducing a new penalty system, but it won’t come into effect during the first year for those mandated from April 2026. That’s a full year’s grace on quarterly penalties.
But after that, if you miss a deadline, you’ll receive a penalty point. Accumulate enough points, and a financial fine follows. The threshold for fines depends on how many updates you’re expected to submit each year. It’s another good reason to stay on top of things.
If you realise you’ve missed some income or expenses from a quarterly update, you don’t need to re-submit that update. Simply correct your digital records and the missing information will be picked up in your next quarterly submission.
Frequently Asked Questions from Pub & Bar Owners
I’ve only just started trading. Do I need to do this straight away? Not immediately. You’ll complete your first Self Assessment tax return as normal, and then HMRC will check your turnover and contact you when you need to sign up for MTD.
I run my pub as a limited company. Does this apply to me? No. MTD for Income Tax applies to sole traders and landlords, not limited companies. You may already be using Making Tax Digital for VAT if your company is VAT-registered, but that’s a separate scheme.
Do partnerships have to use this? Not yet. Partnerships will need to join MTD for Income Tax in the future, but HMRC has not yet confirmed a timeline. For now, partnerships continue to submit Self Assessment tax returns as usual.
How Carroll Accountants Can Help
We’ve been working with pubs, bars and the wider hospitality sector for years, and we’re already helping our clients prepare for MTD for Income Tax.
We can assist with:
- Signing up
- Choosing the right software
- Setting up your digital records
- Managing your quarterly submissions
If you’re not sure whether MTD applies to you yet, or you want to get ahead of the curve before 6 April, get in touch with us today. We’ll make sure you’re ready — without the stress.