Making Tax Digital
What you need to know before April 2026
The roadmap for Making Tax Digital (MTD) for Income Tax is finally here. While the core concept hasn't shifted much since the 2016 consultations, the "who" and the "when" are now set in stone following the Spring Statement 2025.
If you’re a sole trader or a landlord, the way you report your income is about to change significantly. Here is the breakdown of what is required and how to prepare.
The New Rules: What’s Staying the Same?
The fundamental shift is moving from one annual tax return to a "real-time" digital relationship with HMRC.
Digital Records: You must keep digital records of every transaction (income and expenses).
Quarterly Updates: You’ll send a summary to HMRC every three months via MTD-compatible software.
Year-End Finalisation: You will still make a final submission by 31 January to confirm your total profit and any other income, but this must now be done through software—HMRC’s old online filing service will be phased out for those in the MTD regime.
The goal here is to reduce "re-keying" errors. By using digital links between your records and the software, HMRC aims to close the UK "Tax Gap" by ensuring data is accurate from the start.
The Timeline: Are You In?
Mandation is based on your gross income (not profit). If you have multiple income sources—like a trade plus a rental property—you must combine them to see if you hit the threshold.
6 April 2026: Mandatory for those with an income over £50,000.
6 April 2027: Mandatory for those with an income over £30,000.
6 April 2028: Mandatory for those with an income over £20,000 (as confirmed in the 2025 Spring Statement).
Pro Tip: Even if you have two separate businesses, you combine the income to check the threshold. However, once you’re in, you still keep separate digital records for each.
Navigating the Complexities
It isn't all straightforward. There are two "pain points" you should be aware of:
Joint Property: If you own a rental property with someone else, there are "easements" (simplifications) for your digital records. But be careful—if you also own a property solely, different rules apply to that one.
Accounting Dates: If your business year doesn't end on 31 March or 5 April, MTD gets messy. We generally recommend aligning your accounting year with the tax year to avoid complex profit apportionments.
How to Prepare (Starting Now)
If you’re in the April 2026 group, the clock is ticking.
Review your software: If you’re still using paper or basic spreadsheets, your first step is to find a digital solution.
Talk to your agent: You don't necessarily need high-end software if your accountant can import your data into their system. You can also have a bookkeeper manage the digital side for you.
The "Dry Run": Don't wait until the deadline. Start keeping digital records now to get used to the workflow. You can even join HMRC’s pilot program for quarterly reporting to test the waters.