Making Tax Digital (MTD) has changed how sole traders, landlords and the self-employed report their taxes. Uptake of the scheme is also now mandatory for almost all VAT registered businesses.
All VAT registered businesses, regardless of their turnover, are now required to file, pay and update their VAT information online each quarter, using HM Revenue & Customs compliant online accounting software or the tax authority’s own API using bridging tools.
This is the next major step and will affect a lot more people.
Who it applies to:
The key point is that the income threshold is gross, before expenses are taken off. So even if your profit is modest, you may still fall within the rules.
If you’re not sure if you will be required to comply with MTD for Income Tax, get in touch with our experts.
If you fall under MTD for Income Tax, the traditional Self Assessment tax return will be replaced with:
Quarterly updates – Your income and expenses will need to be sent to HMRC every few months through software.
Digital record keeping – Paper records won’t be allowed. Each transaction has to be stored digitally, either in accounting software or in another compatible digital format.
A final end-of-year submission – This replaces the usual tax return and pulls everything together once the year is finished.
You also won’t be able to file your own return directly through the HMRC website anymore. All submissions must go through approved software or a professional adviser.
Need help preparing for the transition to MTD? Get in touch for a consultation.
If you’re VAT-registered, you already do. For Income Tax, you’ll need to comply if your total self-employment or property income is above £50,000 from April 2026, above £30,000 from April 2027 and above £20,000 from April 2028. HMRC will confirm the position for smaller businesses later.
It applies before expenses. HMRC looks at your gross income from self-employment and/or property. This means you may fall within MTD even if your profits are fairly low.
No. If you fall into the threshold, once MTD for Income Tax is introduced, you’ll need to use approved software or work with an accountant who can file on your behalf.
You’ll need HMRC-compatible digital accounting software. The right option depends on the size of your business, how many income sources you have and how hands-on you want to be. We help clients choose and set everything up if needed.
You must store all relevant income and expenses in a digital format, as paper records won’t meet HMRC’s requirements. Software can be used, or in some cases spreadsheets that link to bridging tools.
Instead of one annual return, you’ll need to send quarterly updates plus a final end-of-year declaration.
HMRC will introduce a points-based penalty system for late submissions and repeated missed deadlines can lead to fines. Using the right software and keeping consistent digital records avoids these issues.
If your rental income meets the threshold for your start date, then yes. This applies whether you own one property or many.
Yes. Many clients prefer us to manage the reporting so they don’t have to think about the deadlines or software requirements.
Definitely! Early preparation reduces stress, avoids rushed decisions about software and gives you time to adjust and train the relevant people. It also lets you benefit from better financial visibility sooner.
If you’re unsure, it’s worth checking now. Once we know your income sources and levels, we can tell you exactly which rules apply and when.
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