Let’s be honest – nobody loves tax admin. But if you’re a sole trader or a landlord, there’s a big shift coming that you need to be ready for.
From April 2026, the way you report your income tax to HMRC is going to change under Making Tax Digital (MTD). And if you don’t get ahead of it now, you could face more than just extra paperwork — you could risk penalties and stress that’s easily avoided.
What’s changing under MTD?
Right now, you’re used to sending one Self Assessment tax return each year. But from April 2026, that changes.
Instead of one big return, you’ll need to:
✅ Keep digital records of your income and expenses throughout the year
✅ Submit quarterly updates to HMRC every three months
✅ File a final declaration in January, just like you do now
This new system is known as Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), and it’s designed to make tax reporting more accurate, transparent, and efficient.
Who will it affect — and when?
MTD is being rolled out in stages, based on your income from self-employment or property:
- April 2026: If your income is £50,000 or more
- April 2027: If your income is £30,000 or more
- April 2028: If your income is £20,000 or more
💡 Important: If you have more than one source of income — for example, a business and a rental property — HMRC combines them to check if you meet the threshold. And if you run more than one business, you’ll need to report each one separately.
What this looks like in real life
Instead of one annual tax return, you’ll now be submitting four quarterly updates. These are simple summaries of your income and expenses, sent digitally to HMRC.
Then, just like now, you’ll tie everything together with a final declaration in January, including any adjustments, reliefs, or additional income.
This might sound like more work — but once you’re set up with the right systems, it actually makes life easier.
Get your tools in place now
If you’re still relying on paper records or basic spreadsheets, now is the time to upgrade. Under MTD, you’ll need to use HMRC-approved accounting software or bridging software that links your records directly to HMRC’s systems.
Some popular options include:
- Xero
- QuickBooks
- FreeAgent
You should also make sure your business and personal finances are fully separated — MTD will be far simpler if your accounts are clean and organised.
Why this is actually a good thing
At first glance, MTD might feel like extra work — but once you’re set up, it brings real benefits:
- More control – You’ll see how much tax you owe throughout the year, not just at year-end.
- Fewer surprises – No more unexpected tax bills.
- Time-saving – Automated record-keeping reduces manual work.
- Better decisions – Real-time financial data helps you plan more effectively.
And because you’re reporting regularly, errors are more likely to be spotted and fixed early, before they become a bigger problem.
Top tips for getting MTD-ready
Here’s how to get ahead:
- Check if you’ll be affected based on your income.
- Choose suitable software and start using it now.
- Separate business and personal accounts if you haven’t already.
- Start keeping digital records early — even before it’s mandatory.
- Speak to an accountant to make sure you’re fully prepared.
Don’t wait until 2026 — prepare now
We get it — 2026 sounds like a long way off. But the businesses that start preparing early will find the transition smooth, stress-free, and beneficial in the long run.
Whether you want to handle it yourself, get a bit of expert support, or hand the whole process over to a specialist, we’re here to help.
Contact our MTD team: mtd@thornewidgery.co.uk
Watch our full MTD video series: MTD Hub
Making Tax Digital isn’t just a compliance exercise — it’s an opportunity to get ahead of your finances and take control of your business. Start now, and when the changes arrive, you’ll already be miles ahead.