Making Tax Digital for Income Tax – preparing now
MTD for Income Tax starts in April 2026 for landlords and sole traders with income above £50,000. Start preparing today.
The government’s Making Tax Digital (MTD) programme is set to expand in April 2026, and it will affect many landlords and sole traders. From that date, anyone with annual business or property income above £50,000 will need to comply with the new rules.
What will change
The biggest shift is the move from one annual tax return to quarterly digital updates plus an end-of-year declaration. This means:
- Keeping digital records of income and expenses
- Submitting updates to HMRC every three months using compatible software
- Completing an End of Period Statement (EOPS) to finalise business income
- Submitting a Final Declaration to calculate your total tax liability
Who is affected?
The April 2026 deadline applies to self-employed individuals and landlords whose combined gross income from these sources exceeds £50,000. It is crucial to understand that this threshold is based on gross turnover or rental income, not net profit. If you have both a trade and a rental property, the income from both must be aggregated to determine if you cross the threshold. A second phase will roll out in April 2027 for those with income over £30,000.
The end of paper records
Under MTD for Income Tax, keeping records in paper ledgers or using basic spreadsheets without API-enabled bridging software will no longer meet legal requirements. Every transaction must be recorded digitally. While HMRC will provide some basic free software options, most businesses with income over £50,000 will find that commercial cloud accounting software (such as Xero, QuickBooks, or FreeAgent) is the only practical way to manage the increased reporting frequency.
Why prepare now?
April 2026 may seem distant, but transitioning to digital record-keeping requires significant adjustment. You will need to evaluate software options, migrate your existing data, and train yourself or your staff to use the new system. Furthermore, by adopting cloud accounting now, you gain immediate benefits in terms of real-time financial visibility and streamlined invoicing, rather than simply viewing it as a compliance burden.
We strongly recommend that affected clients do not wait until the last minute. Contact us today to discuss your software options and map out a transition plan that minimises disruption to your business.
Disclaimer
The information contained in this article is for general guidance on matters of interest only. It should not be used as a substitute for consultation with professional accounting, tax, legal, or other competent advisers. Before making any decision or taking any action, you should consult a Kingscott Dix professional.