3 June 2025 –
You might have heard about Making Tax Digital (or MTD) and wondered if it applied to you. Perhaps you have received a letter from HMRC stating you may be affected.
If you are a sole trader or landlord, get ready for major changes coming in April 2026.
So what does this mean, and will it affect you? Here are the key takeaways you need to know…
1. What is MTD for Income Tax (MTD for ITSA)?
MTD is part of HMRC’s plan to modernise the tax system. Individuals impacted will need to:
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Keep digital records using compatible software
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Submit quarterly updates to HMRC
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File a final end of year tax return
This is a big change from the current annual Self Assessment process, which involves filing only one submission per tax year.
2. Who Will It Affect?
From April 2026, MTD for ITSA will apply to:
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Sole traders
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Landlords
with combined property and self-employment income above £50,000 (based on your 2024/25 tax return).
From April 2027, that threshold will drop to £30,000, with a further drop to £20,000 from April 2028, bringing in a significant proportion of sole traders and landlords.
✅ The threshold refers to your total combined income before expenses – so if your 2024/25 gross income is £55,000 and your net profit is £20,000, MTD still applies from April 2026.
3. What about Paying my Tax Bill?
The payment dates for tax will remain the same under the new scheme – with tax payable by 31 January following the end of each tax year.
Payments on account may be required in January and July where relevant, as per the existing system.
So no additional payments will be required when submitting your quarterly reports for MTD.
4. What Software Do I Need?
MTD for ITSA requires compatible software to:
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Record your income and expenses
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Submit quarterly updates to HMRC digitally
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Generate your end-of-year tax return
At Zip Accounting, I can set up MTD-compatible software for you and manage it on your behalf, or support you if you’re doing it yourself.
5. When Should I Start Preparing?
If your combined sole trade and property income exceeds the £50,000 threshold in the 2024/25 tax year, then MTD will likely apply to you from April 2026.
Once you are brought into MTD, you can only be taken out of the scheme if your qualifying income falls below the MTD income threshold for three consecutive tax years.
Don’t leave it too late to get ready—consider:
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Switching to digital record-keeping now
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Setting up a dedicated business bank account if you don’t already have one
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Seeking advice on the right software for your situation
Need Help Navigating MTD for Income Tax?
Whether you’re confident with tech or feeling overwhelmed by the idea of digital records, Zip Accounting is here to help you every step of the way.
From software setup to ongoing support and submissions, I can help you fulfil your obligations under MTD.
👉 Contact me today to find out if MTD will affect you—and how to make the transition stress-free.
