We hope you have heard by now, but the way that you report Income Tax is changing with Making Tax Digital (MTD) and if you’re a sole trader or landlord, you need to get ready.

From April 2026, HMRC will begin phasing in MTD for Income Tax and whilst it may sound daunting, with the right preparation, tools and support, it doesn’t need to be.

To help you out, our MTD experts have prepared this short guide that explains what’s coming, the options available to you, and how you can start preparing now to avoid a last-minute scramble later.

What is Making Tax Digital for Income Tax?

MTD for Income Tax means you’ll need to:

• Keep digital records of your income and expenses at a transactional level
• Submit quarterly updates of your income and expenditure to HMRC
• Complete an annual end-of-year tax return submission to finalise your tax position

This new system will replace the single annual Self Assessment tax return submission with a more regular, digital approach.

Who is affected and when?

The rollout is being phased in as follows:

• From April 2026: Those with gross self-employed and/or property income over £50,000
• From April 2027: Threshold lowers to £30,000
• From April 2028: Threshold lowers to £20,000

Your requirement to join the system will be based on your gross income for the 2024/25 tax year and you may have already received a letter from HMRC advising that you will be required to join.

It’s, therefore, important that your tax return submissions and records are up to date so we can advise on your likely obligations.

What will I need to do?

If you are affected, from your phase-in date, you will need to submit quarterly updates to HMRC for the following periods:

• 6 April – 5 July (due by 7 August)
• 6 July – 5 October (due by 7 November)
• 6 October – 5 January (due by 7 February)
• 6 January – 5 April (due by 7 May)

You can also opt to align with calendar quarters if preferred (e.g. April–June) when you join the system.

If you have more than one business, for example, a sole trade and a rental property, you’ll need to submit quarterly returns for each one separately.

Alongside these updates, you will need to submit a final year-end tax return by the following 31 January, for example, 31 January 2028 for the 2026/27 tax year.

This return will bring together all MTD data along with any additional income, gains or claims.

This means an additional tax reporting burden for your business throughout the year, but a more accurate picture of your taxable income, which may help you assess your tax bill as the year progresses.

What are the practical realities?

Let’s be honest, MTD for Income Tax is going to involve a fairly substantial change in the way that you work, but it doesn’t necessarily have to be a painful one.

Here’s what you should be thinking about now:

• Are you already using software?
  If so, check whether it’s MTD-compatible. And note: if you’re already under MTD for VAT, the quarters may not align.
• Are you still using manual records or spreadsheets?
  That’s fine for now, but bridging software will be needed to make digital submissions.
• Still using paper records?
  We can work with that, but it will involve more time and, therefore, higher professional costs to digitise the information each quarter.
• Do you have a separate business bank account?
  If not, now is the time. Separating personal and business finances makes quarterly reporting far easier and will save you both time and money.

Although the deadline to comply may seem far away, taking these steps now will give you peace of mind and also help to provide you with a clearer picture of your Income Tax position and finances.

What are my options for Making Tax Digital for Income Tax?

We want to make MTD as simple as possible. With us, you have three main options to achieve compliance:

1. Do it yourself using MTD-compatible software
   You purchase approved third-party software, record your income and expenses digitally, and submit each quarterly return yourself. We’ll then use that data to prepare your annual tax return and ensure everything ties together.
2. Let us handle it all
   You continue to send us your records in whatever format suits you. We’ll digitise the data, compile your figures and make the quarterly submissions on your behalf using our in-house systems.
3. A hybrid approach
   You use software to record your figures each quarter, but we review and submit the quarterly returns for you – using either your software or ours.

We’ll advise on the best software for your situation and support you throughout whichever option you choose.

What happens if I get it wrong?

MTD will introduce a new points-based penalty system for late or missing submissions, alongside new late payment rules.

The aim is to encourage compliance through education rather than instant punishment, but it’s still important to get it right.

The good news about Making Tax Digital

The good news is…you still have time to prepare.

Taking early steps now, such as moving to digital records, reviewing your income levels, and choosing your compliance option, will help you avoid unnecessary stress as 2026 and the following phased deadlines approach.

We’re already supporting clients through this change. If you have questions, want to explore software options, or would like us to take the process off your hands entirely, we’re here to help.

Get in touch to start preparing and make MTD for Income Tax as smooth and stress-free as possible.