HMRC has released important changes to Making Tax Digital (MTD). These changes will affect how sole traders and landlords manage and report their tax information.

In this article, we explore the changes so that you understand what’s happening, when it applies to you and what actions to take. If you're a client and affected, we'll soon be reaching out to you regarding this.
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What is MTD for Income Tax?

The Making Tax Digital (MTD) program is the government's digital tax system, designed to modernise the tax system and reduce errors.

HMRC is now expanding this system so that more taxpayers must use digital tools and MTD compatible software to record their income and expenses and submit tax information electronically.

In this latest expansion of the program, HMRC has laid out plans to:

"Expand MTD for Income Tax to sole traders and landlords with income over £20,000 from April 2028"

Important: Starts 1st April 2026 (for some)
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What is changing?

Under the new MTD rules, those affected will no longer simply submit an end-of-year tax return but instead will:

• Use recognised MTD software to track income and expenses‍
• Send quarterly updates to HMRC
• ‍Submit your tax return on 31 January each year

Who does this affect and when?

Anyone who has filed their first Self Assessment tax return may be affected. For example, if you're a sole trader or earn income from property (landlords), then you need to evaluate the following.

MTD for Income Tax applies only if both of the following are true:

1. You file a Self Assessment tax return, and
2. You have qualifying income above the relevant threshold

MTD Thresholds - When does this affect you?

The new MTD for Income Tax regime is being introduced gradually based on your levels of self-employment and property income.

Here's when you'd need to start using the new system.

If your total qualifying income from self-employment and property is:

• Above £50,000 for the 2024/25 tax year = Start from 6 April 2026‍
• Above £30,000 for the 2025/26 tax year = Start from 6 April 2027‍
• Above £20,000 for the 2026/27 tax year = Start from 6 April 2028

What is qualifying income for MTD?

Qualifying income relates to the total income you receive in a tax year from self-employment and property.

This may come from various sources of self-employment or property income.

The following (other) sources of income do not count towards your total qualifying income. Income from:

• Employment (PAYE)
• Dividends (incl. those from your own company)
• A Partnership
• A pension (State or Private)

How do I workout qualifying income?

Importantly, HMRC assesses your gross income before you deduct expenses (NOT your net income after expenses are deducted).

They do this by looking at your Self Assessment tax return that you submitted in the previous tax year.  

For example, if your 2024/25 tax return shows that you received:

• £20,000 from renting out a property, and
• £35,000 from your self-employed activities

Then, your total qualifying income for the 2024/25 tax year would be £55,000.

Since this exceeds £50,000, based on the MTD thresholds above, you would need get ready to start using MTD for income tax from April 6 2026.
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Who does this not affect currently?

Based on the above thresholds, if your qualifying income is less than £50,000 for the 2024/25 tax year, you do not need to worry about MTD for Income Tax just yet but you should re-look at it following your 2025/26 return based on the above thresholds.

You also do not need to start using MTD for Income Tax until after you have registered for Self Assessment and submitted your first Self Assessment tax return, however, you may choose to sign up early, provided you have submitted a tax return within the last 2 years. There are also exemptions.
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Making Tax Digital Exemptions

If you meet the specific criteria for digital exclusion, you aren't required to use MTD for Income Tax.

In addition, you are automatically exempt and should not sign up for Making Tax Digital if you are:

• A non-resident company
• Completing tax returns as a trustee
• An individual who doesn't have a National Insurance (NI) number (applies to the tax year where you don't have a NI number by 31 January before the start of the tax year)
• Completing tax returns as a personal representative of someone who has passed away

If you're automatically exempt, you also do not need to inform HMRC or apply for the exemption. This may change in the future.

You can use HMRC's tool to check if you need to start using MTD.
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What to expect before the start of the tax year?

HMRC will review your Self Assessment tax return to check your qualifying income each tax year. 

If your income is above the relevant threshold, HMRC will write to you to confirm that you need to start using MTD for Income Tax by the start of the upcoming tax year (6 April).

That said, it is still your responsibility to start using the new system when you are required.
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If affected, what should you do?

You will need to signup for the service before you need to use it. You can learn more and sign up here. In addition, you'll either need to:

• Choose and authorise your Making Tax Digital software, or
• Decide how your agent will act for you, if you're a client, we will handle this for you.

If you're an affected sole trader or landlord, HMRC provides a step-by-step guide, essentially, you need to:

1. Check your qualifying income - we can help you estimate whether you meet the thresholds that trigger MTD for Income Tax.‍
2. Ensure you’re using MTD-compatible software - All of our clients' accounting packages (Xero) are already compatible, but if you use something else or are unsure, please speak with us.‍
3. Plan for quarterly updates - You'll shift from one annual filing to four quarterly summaries, this will require more frequent bookkeeping. If you're a client, we're ready to handle this for you.‍
4. Sign up when required - HMRC will usually notify you if you need to start using MTD for Income Tax.

Important dates to know

• 31 January 2026 – Deadline to submit your Self Assessment for the 2024/25 tax year.
• 6 April 2026 – MTD for Income Tax begins if you have qualifying income over £50,000 for 2024/25. If so, then:
  
  • 7 August 2026 – Deadline for the first quarterly update.
  • 7 November 2026 – Deadline for the second quarterly update.
  • 7 February 2027 – Deadline for the third quarterly update.
  • 31 January 2027 – Usual deadline to submit your Self Assessment return for the 2025–26 tax year (alongside the final declaration under MTD).

We’re here to help

We appreciate that the changes represent a significant shift from the traditional Self Assessment approach.

If you're an affected client, we'll be in touch with you soon. If you have any immediate questions, please contact your accountant. We’re here to support you and ensure you stay compliant with the new requirements.‍

If you're not a client yet and wish to work with us, please get in touch on this page.