Making Tax Digital (MTD) for Income Tax: Less Than a Year to Go

If you’re a sole trader or landlord in the UK with an annual income over £50,000, big changes are on the horizon. From 6 April 2026, you may be required to keep digital business records and submit quarterly updates to HM Revenue and Customs (HMRC) under the new Making Tax Digital (MTD) for Income Tax rules.

This is one of the biggest transformations in the Self Assessment system since it began, and while there are clear benefits, it also means significant changes to how you manage your accounts and tax reporting.

What Is Changing Under MTD for Income Tax?

From April 2026, if your total income from self-employment and/or property rental exceeds £50,000, you must:

• Keep digital records using MTD-compatible accounting software.
• Submit quarterly updates of your income and expenses to HMRC.
• File an end-of-year final declaration (which replaces the traditional Self Assessment tax return).

It’s important to note that the qualifying income refers to total gross income — before deducting any expenses or allowances.

The goal of Making Tax Digital is to modernise the UK’s tax system with more frequent, accurate, and digital reporting. While some businesses may benefit from better financial organisation and reduced errors, it marks a significant shift away from the traditional once-a-year tax return model.

Benefits of MTD for Income Tax

Some of the key advantages of Making Tax Digital for Income Tax include:

• More up-to-date information about your ongoing tax position throughout the year.
• Possible time savings at year-end if records are maintained properly.
• Reduced risk of errors when submitting tax returns.

For many, regular digital bookkeeping will help with financial visibility and cash flow management.

Challenges You Should Prepare For

However, adapting to MTD will also bring challenges, such as:

• A new administrative burden — four quarterly submissions plus a final declaration each year.
• The need to purchase or subscribe to MTD-compliant accounting software (such as Xero, QuickBooks, or FreeAgent).
• A learning curve for those unfamiliar with digital bookkeeping and accounting platforms.

For sole traders and landlords used to sorting taxes just once a year, this shift to continuous record-keeping will require forward planning and possibly new workflows.

When Does MTD for Income Tax Apply?

The rollout of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) will be phased based on your income:

• From April 2026: Self-employed individuals and landlords earning over £50,000 must comply.
• From April 2027: The threshold reduces to £30,000.
• From April 2028: It drops further to £20,000.

HMRC is encouraging businesses to participate in the MTD pilot scheme. Joining the pilot allows you to get familiar with the new process early — and during testing, there are no penalties for late submissions.

How We Can Help You Get Ready for MTD

At EOACC, we specialise in helping sole traders, landlords, and small businesses prepare for Making Tax Digital. Our services include:

• Helping you choose the right MTD-compatible software.
• Setting up and managing your digital bookkeeping system.
• Providing full support with quarterly submissions and your end-of-year tax return.

Every business is different — some may need just minor adjustments, while others might require a full overhaul of how they record and submit financial information. If you’d like to discuss how MTD for Income Tax will affect you, or how to prepare your business for success, get in touch with our team today.