Finexer says tax digital shift exposes SME finance gaps

Finexer said the latest rollout of Making Tax Digital for Income Tax is exposing outdated finance processes among UK small and medium-sized businesses. The shift to quarterly updates is pushing more firms towards real-time financial reporting.

Under the change, self-employed individuals and landlords earning more than £50,000 will have to submit quarterly updates for the first time. Finexer argued that this turns what has often been treated as an annual or periodic finance task into an ongoing process, leaving less room for manual work and delayed reconciliation.

For many SME finance teams, that means long-standing practices are coming under closer scrutiny. Manual data entry, batch-based reconciliation, and incomplete records are harder to sustain as reporting cycles shorten and businesses need up-to-date financial information throughout the year.

Ravi Ranjan, Co-Founder and Chief Executive Officer of Finexer, said the issue can no longer be deferred.

"Making Tax Digital is not a future problem for accounting SaaS. It is a current requirement that demands live, continuous financial data. The platforms that make this infrastructure transition now will not revisit it. Those who have delayed will be under more pressure against competitors who have already moved on," Ranjan said.

Finexer argued that the costs tied to legacy finance processes are already substantial. It pointed to payment processing costs, such as card fees, which can range from 1% to 3% depending on the provider and volume, leaving some SMEs paying tens of thousands of pounds a year.

Those costs have often been absorbed over time, but more frequent reporting may make them easier to spot. Finexer said the broader problem is that many systems used by finance teams, including card networks, manual bank transfers, third-party data tools and document-based verification, were not built for real-time operations.

Real-time pressure

The first quarterly reporting deadline under the new regime will fall in July, increasing pressure on finance teams that still rely on processes designed for year-end catch-up. In practice, that leaves less time to correct errors, chase missing data or reconcile transactions that have built up over weeks.

This creates operational strain not only for businesses but also for accounting software providers, payroll platforms and enterprise resource planning vendors that depend on fragmented payments and data systems, adding delays, cost and complexity across finance workflows, according to Finexer.

Ranjan said finance teams now face scrutiny much earlier in the cycle. "Finance teams don't have the luxury of fixing things at year-end anymore. If your data isn't accurate in real time, the pressure shows up immediately, whether that's in reporting deadlines, reconciliation, or cash flow visibility," he said.

Open banking

Finexer framed open banking as one route away from fragmented finance systems. The UK is already one of the most established open banking markets, with more than 16 million active connections and millions of payments processed each month, according to figures cited in the announcement.

Separate analyses by Open Banking Limited and EY estimated that the UK open banking market could generate GBP 43 billion in annual economic value at full maturity. The same assessment said open banking has already delivered GBP £8.3 billion in economic value to date and is currently generating GBP £2 billion in annual benefits.

The report also cited 31 million open banking payments processed in one month, representing 70% year-on-year growth, alongside 24 billion successful API calls over the year, up 27% from the previous year. Payment initiation rose by 53%, the figures showed.

Even so, Finexer said access to open banking in a form suitable for scaling software and business platforms has remained difficult until recently. It argued that this has left a gap between rising expectations for real-time finance and the infrastructure available to support it.

Demand is rising from SMEs that want faster payments, clearer cash-flow information and less cumbersome finance workflows, according to the company. For platforms that can combine payments and financial data more directly, the benefits can extend beyond tax reporting into day-to-day treasury and operations.

Finexer said it has seen stronger demand from platforms seeking to simplify their finance systems ahead of the April 2026 changes. The business, which provides payments, financial data and verification through a single application programming interface, was recently ranked 32nd in Sifted's list of the fastest-growing startups in the UK and Ireland.

Ranjan said the wider shift goes beyond compliance. "The conversation around MTD is still focused on deadlines, but the real change is structural. Finance teams are moving to an operating model where data needs to be available, accurate and usable all the time. The businesses that adapt to that will be in a much stronger position - not just to stay compliant, but to make better financial decisions," he said.