Making Tax Digital for Income Tax: It is Officially Here

Happy Friday! The wait is finally over. As of 6 April 2026, Making Tax Digital (MTD) for Income Tax (IT) is officially in motion. This marks a significant shift in how many sole traders manage their records and report to HMRC. While change can feel a bit overwhelming, we are here to help you navigate the new requirements, and if by the end of this short blog, you have any questions (or, let's be honest, don't want the hassle!) our contact details are at the bottom for you.

Who needs to comply right now?

The rollout of MTD for IT is happening in stages based on your gross income. Currently, the following groups are affected:

• From 6 April 2026: Self-employed individuals and landlords with a total business or property income above £50,000.

  
  

• From 6 April 2027: Those with an income above £30,000 will be brought into the fold.

• By April 2028: HMRC intends to extend this to those with income over £20,000.

  
  

• General Note: It is important to remember that your PAYE income does not count towards these thresholds.

  
  

The new reporting cycle

Under the old system, you likely only thought about your taxes once a year. Sadly, that changes now. To remain compliant, you'll need to follow a new digital workflow:

1. Digital Record Keeping: You must use functional compatible software to record every business transaction digitally. Paper ledgers or simple spreadsheets alone will no longer suffice unless they are linked via bridging software.

   
   

2. Quarterly Updates: Every three months, you will send a summary of your income and expenses to HMRC. These are not full tax returns, but they give HMRC (and you) a real-time view of your tax position.

   
   

3. Final Declaration: At the end of the tax year, you will submit a final declaration. This replaces the old Self Assessment return and allows you to claim reliefs or account for other types of income.

   
   

4. Tax Payments: The deadlines for paying your tax remain the same. You will still need to pay your balance by 31 January following the end of the tax year.

   
   

Choosing the right software

Selecting the right tools is the best way to make this transition painless. Modern accounting software does all of the heavy lifting for you by categorising transactions and calculating your estimated tax bill automatically.

I often recommend Xero for its robust features and ease of use. You can find a wealth of information in the Xero MTD for Income Tax resource guide, or if you are a landlord or a smaller sole trader, FreeAgent is another fantastic option that simplifies the quarterly update process. They have produced a very helpful MTD for ITSA guide for small businesses that is well worth a read.

Why this is a positive move

While it requires a bit more admin during the year, digital record-keeping provides far better visibility of your cash flow. You will no longer be surprised by a large tax bill in January because your software provides an ongoing estimate. It also reduces the likelihood of manual errors, which keeps you on the right side of HMRC.

If you are unsure whether you meet the thresholds or need help getting your digital records in order, please do get in touch. We can review your current setup and ensure you are fully prepared for the 2026/27 tax year.

Ready for MTD? Put your plan into action (Youtube Video)

This video provides a practical look at how to use software tools to manage your MTD workflows and reduce administrative stress - uploaded by FreeAgent.

Still unsure about Making Tax Digital for Income Tax?

You can contact me on the below details, where I'm more than happy to go through everything with you directly.

Tel: 01785 291236

Email: info@burleyfields.co.uk