If you're a sole trader or a landlord, you've probably heard rumblings about Making Tax Digital (MTD). It's not just HMRC’s latest tech buzzword—it’s a real change, and it’s coming sooner than you might think.
The next major phase, called MTD for Income Tax (or MTD IT), will gradually replace the current Self Assessment system starting April 2026. But don’t worry—this isn’t just about extra admin. In fact, it could help you manage your taxes more efficiently, reduce costly mistakes, and give you better visibility of your business finances.
Let’s break down what MTD IncomeTax actually is, what it means for your income tax reporting, and how to prepare now so you’re not caught off guard.
At its core, Making Tax Digital is HMRC’s way of modernising the UK’s tax system. It's all about using technology to improve accuracy, transparency, and timeliness. No more boxes of crumpled receipts or last-minute panic attacks before the 31st of January.
Under MTD, individuals and businesses will:
Think of it as shifting from one big annual tax return to four smaller updates, giving you a clearer view of how much tax you owe throughout the year—not just when the Self Assessment deadline looms.
The first rollout, MTD for VAT, is already in full swing. All VAT-registered businesses now use digital tools to maintain records and file returns. Now, it's income tax’s turn.
Making Tax Digital for Income Tax (also known as MTD IT) is the next chapter in the MTD journey. This phase targets sole traders and landlords whose combined turnover exceeds a certain threshold.
Here's how it will work:
No more spreadsheets. No more paper trails. Just consistent, digital record keeping that keeps HMRC in the loop and you in control.
So why is all this necessary? Why fix what isn’t broken?
Actually, it is a fix. The current system sees too many errors, missed deductions, and underpaid tax. MTD aims to tighten things up while making your life easier in the long run. Here's how:
In short: MTD isn’t just a change. It’s an opportunity to run a smarter business.
This is where the fine print matters. If your combined income from self-employment and/or property meets the following thresholds, you’ll need to join MTD IT:
If you earn from both being a sole trader and renting out property, HMRC adds the two together. For example, if you make £35,000 from your freelance business and £20,000 from rental income, that’s £55,000 total. You’re in.
Your eligibility will be based on the figures from your previous year’s Self Assessment. So, for the 2026 deadline, HMRC will look at your 2024/25 return.
If you're under the threshold for now, no rush—you can continue with standard Self Assessment. But given the direction of travel, it’s a good idea to start preparing anyway.
Yes. HMRC recognises that not everyone can go digital. You can apply for an exemption if:
In these cases, HMRC may grant permission to continue filing the old-school way.
At the time of writing, partnerships don’t need to comply with MTD for Income Tax just yet. However, it's expected that the rules will eventually apply to them too. Stay tuned for updates.
MTD for Income Tax might feel far off, but there are a few simple things you can do now to be ahead of the curve:
✅ Check Your Income
Add up your income from self-employment and property. If your total exceeds £50,000, you’ll need to comply from April 2026. If you have more than one sole trader business, combine all turnover amounts.
✅ Choose the Right Software
Look for HMRC-recognised MTD software that can handle digital record keeping and quarterly submissions. Many cloud accounting platforms already meet these requirements.
✅ Digitise Your Records
Start getting used to tracking income and expenses digitally. The more familiar you are before the deadline, the less painful the switch will be.
✅ Speak to an Accountant
An experienced accountant can help you assess your eligibility, set up the right tools, and train you (or your team) on the new process.
Whether you’re a sole trader, a landlord with a few properties, or both—MTD for Income Tax is coming. And while it might feel like just another HMRC hoop to jump through, it’s actually a great chance to tighten your finances and stay in control of your tax obligations all year round.
Start planning now, get the right software, and seek advice if you need it. That way, when the April 2026 deadline rolls around, you’ll be ready—and possibly even thankful—for a smoother, smarter tax process.
If you’re unsure where to star tor want help making the transition seamless, our team of friendly accountants is here to help.
Let’s make tax digital work for you.