Estimated reading time: 3 minutes
Introduction
Making Tax Digital (MTD) for Income Tax is changing the way many sole traders and landlords keep records and report their income to HMRC. The new system is designed to encourage digital record keeping, reduce errors and spread tax administration throughout the year, rather than relying solely on an annual Self Assessment tax return.
If you’re self-employed, receive rental income, or both, it’s important to understand whether the new rules will apply to you and what steps you can take now to prepare.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax is a new reporting system introduced by HMRC for individuals who currently complete a Self Assessment tax return because they receive income from self-employment, property, or both.
Instead of relying solely on paper records or spreadsheets and submitting one annual tax return, affected taxpayers will be required to keep digital records, use compatible software, submit quarterly updates and complete a final end-of-year submission.
Who Will Need to Use Making Tax Digital?
HMRC is introducing the changes in stages based on qualifying income from self-employment and property.
- From 6 April 2026 – Individuals with qualifying income of more than £50,000.
- From 6 April 2027 – Individuals with qualifying income of more than £30,000.
- From 6 April 2028 – Individuals with qualifying income of more than £20,000.
Qualifying income is generally gross income before expenses from self-employment and property businesses.
What Will You Need to Do?
Keep Digital Records
Your business records must be kept digitally using software compatible with HMRC.
Submit Quarterly Updates
You’ll send summaries of your income and expenses to HMRC every quarter using compatible software.
Complete Your End-of-Year Submission
At the end of the tax year you’ll complete a final declaration to confirm your taxable income and final tax position.
How Can You Prepare?
Preparing early can make the transition much easier.
- Review whether your qualifying income exceeds the relevant threshold.
- Move from manual records to digital bookkeeping.
- Choose compatible software.
- Speak to your accountant about the changes.
- Allow time to become familiar with your software.
Do You Still Need a Tax Return?
Yes. Quarterly updates do not replace the final end-of-year submission, which confirms your Income Tax position.
How We Can Help
We can help determine whether the rules apply to you, recommend suitable software, maintain compliant records and submit your quarterly updates and final declaration.
Further Reading (HMRC)
- Making Tax Digital for Income Tax collection: https://www.gov.uk/government/collections/making-tax-digital-for-income-tax
- Making Tax Digital for Income Tax step-by-step guide: https://www.gov.uk/government/collections/making-tax-digital-for-income-tax-for-businesses-step-by-step
- Sign up for Making Tax Digital for Income Tax: https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-income-tax
- Choose the right software: https://www.gov.uk/guidance/choose-the-right-software-for-making-tax-digital-for-income-tax
- Find compatible software: https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax
Disclaimer
This article is intended as general guidance only and is based on HMRC guidance available at the time of writing. Tax legislation and HMRC guidance may change, and individual circumstances differ. Professional advice should always be sought before making decisions based on your own circumstances.
Last reviewed: July 2026
