You may have already heard of Making Tax Digital (MTD), HMRC’s long-term plan to modernise the way taxes are reported and paid. First came MTD for VAT, and next up is Making Tax Digital for Income Tax (or MTD for IT for short). This change will impact sole traders and unincorporated landlords with an income above certain thresholds, requiring them to keep digital records and submit quarterly updates to HMRC. With less than a year to go before MTD for IT becomes mandatory in April 2026, now’s the time to understand whether it applies to you and how getting ready early can actually make life easier, save you time, and help you run your business more efficiently.
If you are a sole trader or run an unincorporated property business, and your ‘qualifying income’ (generally turnover from a sole trade or property business) is £50,000 or more in the 2024/25 tax year, you will be mandated into MTD for IT from 6 April 2026.
Unless you've already completed your 2024/25 Self Assessment or are on top of your financial position, then your 2023/24 Self Assessment tax return should give you an indication as to whether or not you’ll be mandated. If your qualifying income in 2023/24 was above or nearing £50,000, and you expect it to stay at around that level or increase for 2024/25, then there’s a good chance that you’ll be mandated.
HMRC are taking this approach. They have said that they’ll use 2023/24 returns (the deadline for which was 31 January 2025) to identify which taxpayers are likely to be mandated from 6 April 2026. They’ll be sending those taxpayers a letter in the coming months, advising them that they’re likely to be mandated and explaining why.
If you receive such a letter, or if you’d like to know more about preparing for MTD for IT, contact our team, who will be happy to help. MTD for IT will involve keeping your detailed accounting records in compatible software and sending quarterly digital reports to HMRC. This might be a big change for some, but it could actually benefit you.
We can help you choose the most suitable software and implement the required processes in a way that adds value to your business.
In some circumstances, business owners may be exempt from MTD IT for a period. You can check the criteria on gov.uk. For example, if you start a new business between 6 April 2025 and 5 April 2026, you won’t have to comply with MTD IT until after your first Self Assessment. However, choosing to sign up from the outset will mean you’re well-prepared when the process becomes mandatory.
We offer ongoing support with quarterly reporting, and should you need additional services such as bookkeeping, VAT returns, payroll, or tax planning, we can take care of those too - leaving you to focus on running your business with confidence.
We’ll be sharing more about Making Tax Digital over the coming months.