Making Tax Digital for Income Tax

Digital tax reporting for sole traders and landlords – explained clearly and handled properly.

Who MTD for Income Tax applies to

Making Tax Digital (MTD) for Income Tax is being introduced gradually for self-employed individuals and landlords who earn over certain income thresholds.  It changes how income and expenses are recorded, kept digitally and reported to HMRC.

MTD for Income Tax starts from:

  •  April 2026 – if your qualifying income is over £50,000
  • April 2027 – if your qualifying income is over £30,000
  • April 2028 – if your qualifying income is over £20,000 

“Qualifying income” generally means your total gross income (not profits) from self-employment and/or UK property rental income.

Who is likely to be affected?

MTD for Income Tax will affect sole traders and landlords including:

  •  tradespeople and subcontractors
  • consultants and freelancers
  • online sellers and ecommerce businesses
  • side businesses
  • buy-to-let landlords
  • partnerships (expected in later phases of rollout)

If you’re unsure whether you need to register, we can review your turnover and business type with you.

What changes under MTD for Income Tax?

Instead of keeping records manually and filing one Self-Assessment return each year, affected businesses will generally need to:

  • keep digital accounting records
  • use compatible software
  • submit quarterly updates to HMRC
  • complete a final year-end declaration

The aim is to move tax reporting closer to real-time bookkeeping. 

Important things to know

Quarterly updates are not four separate tax returns

The quarterly submissions are summary updates of your income and expenses during the year.  A final year-end submission is still needed to confirm the correct tax position.

It’s based on income, not profit

The thresholds apply to gross qualifying income before expenses are deducted.

MTD applies even if your bookkeeping is simple 

Even smaller businesses with straightforward income may still need to comply once they cross the thresholds.

Good bookkeeping becomes much more important

Because reporting happens throughout the year, keeping records organised and up to date matters far more than under the current once-a-year approach.

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What records and software will you need?

Don't worry if your bookkeeping isn't fully organised yet - many businesses still rely on spreadsheets or incomplete records. We can help tidy things up and build a simple system that works for you.

Records you'll usually need to keep:

Most businesses will need digital records of:

  • sales invoices and income

  • business expenses and receipts

  • bank transactions

  • rental income and costs

  • payroll & VAT records (if applicable)
Good records become much more important under MTD because reporting happens throughout the year.

Software and bookkeeping setup

You'll usually need:

  • MTD-compatible software

  • a digital bookkeeping process

  • regular bookkeeping updates

  • organised bank and expense records

  • bank feeds and imported transactions

The best setup depends on your business size, bookkeeping complexity and how much automation or support you want.

Possibly. Many businesses will need to move toward digital bookkeeping and MTD-compatible software.

Some businesses may still be able to use spreadsheets with bridging software, while others may benefit from cloud accounting systems with bank feeds and receipt capture.

The best setup depends on how your business operates and how up to date your records already are.

Instead of filing one Self Assessment return alone, affected businesses will generally need to:

  • keep digital records
  • submit quarterly updates
  • complete a final year-end declaration
The goal is to keep tax reporting more up to date throughout the year.

You’re not alone.

Many businesses still rely on spreadsheets, paper records or bookkeeping that’s only updated once a year.

We can help tidy things up, organise records properly and build a manageable system before MTD deadlines begin.

MTD for Income Tax: Quick checklist

  • Check whether your income exceeds the MTD thresholds
  • Make sure bookkeeping records are digital and organised
  • Choose suitable MTD-compatible software
  • Separate business and personal transactions clearly
  • Build a regular bookkeeping routine
  • Prepare for quarterly updates instead of annual-only reporting
  • Review your bookkeeping process before deadlines arrive

MTD doesn't need to be overly complicated - the right setup is usually simpler than most businesses expect.

Not sure where to start?

We can help you get ready for Making Tax Digital - from choosing suitable software and organising digital records to keeping quarterly updates simple, compliant and manageable.

Book a Free 20-Minute Call