The government is rolling out major changes to how sole traders and landlords report their income tax — and if you’re one of them, it’s time to start preparing.
Making Tax Digital (MTD) for Income Tax will become mandatory for many from April 2026, with further changes following in 2027 and 2028. It’s one of the biggest overhauls to personal tax in decades and could transform how you manage your business finances.
Here’s what you need to know to stay ahead and avoid disruption.
What’s the Timeline for MTD for Income Tax?
The rollout is being phased in based on your total self-employed and/or property rental income:
- April 2026: If you earn over £50,000 in gross income, MTD for Income Tax will apply.
- April 2027: The threshold lowers to £30,000.
- April 2028 (proposed): Those earning £20,000+ may also be brought into scope.
If your income is under £20,000, you’re not yet included — but that could change. Now is a good time to start preparing regardless, especially if your income fluctuates near the threshold.
What Will You Be Required to Do?
Once MTD applies to you, you’ll need to meet the following requirements:
- Submit quarterly income reports to HMRC using compatible software. If you earn from more than one source — for example, a freelance business and rental property — you’ll report each income stream every quarter.
- Submit a final year-end declaration via the same software, similar to how Self Assessment currently works. You’ll still pay tax by the 31 January deadline.
Modern accounting software can automate much of this process, meaning fewer errors and less time spent on manual bookkeeping.
Upgrade How You Run Your Finances
While the word “mandatory” might set off alarm bells, MTD for Income Tax could actually streamline your financial admin and give you greater control over your cash flow.
If you’re still relying on spreadsheets or manual records, now’s the time to switch to cloud-based accounting. These tools allow you to:
- Issue and chase invoices quickly — with digital payments built in
- Track income and expenses in real time
- Get alerts about late payments or unusual activity
- Estimate your tax liability throughout the year (so there are no nasty surprises come January)
Actively Sign Up for MTD
MTD for Income Tax won’t apply automatically — you’ll need to:
- Choose MTD-compatible software
- Register for MTD with HMRC
- Configure your software to link to your tax account
If you have an accountant, they can guide you through this process and ensure everything’s set up correctly. Start this conversation early to avoid last-minute hiccups.
Are There Any MTD Exemptions?
Yes — not everyone will be affected straight away. MTD for Income Tax does not yet apply to:
- Partnerships (of any kind)
- Those earning below the income thresholds mentioned above
- People without a National Insurance number
- Taxpayers claiming qualifying care relief (e.g. foster carers)
- Those claiming Married Couple’s Allowance or Blind Person’s Allowance
- Individuals who are digitally excluded due to location, religion or disability
If you believe you may qualify for an exemption, you’ll need to apply via HMRC.
What MTD Means for Your Business
MTD for Income Tax isn’t just about compliance. It’s a push toward digital efficiency and an opportunity to build better financial habits in your business.
By making the switch early and choosing the right software, you can save time, reduce mistakes, and gain a clearer picture of your financial position.
That means better decision-making, fewer admin headaches, and less stress when tax season rolls around.
Ultimately, this isn’t just a tax change; it’s a step change. Preparing now can give your business a real advantage, even before the new rules officially apply.
Speak to your accountant, research compatible software, and start planning your transition today.
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