MTD for Income Tax – latest update
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is moving closer, and HMRC has now clarified more detail around how the new reporting requirements will work in practice for sole traders and landlords. While the start dates remain staged, it is now clear that digital record-keeping and quarterly reporting will become the standard way income tax is managed going forward.
At Stonegate, we are already preparing clients for this change by helping them move away from spreadsheets and paper records and into reliable, HMRC-recognised software. Based on functionality, compliance readiness, and long-term support, Xero is our preferred MTD ITSA solution for most clients. It provides a practical way to maintain digital records throughout the year, submit quarterly updates, and reduce the stress and cost of year-end tax returns.
MTD ITSA is not simply a change to how often figures are submitted — it is a fundamental shift in how records are kept and reviewed. Early preparation will be key, and choosing the right software now will make the transition significantly smoother.
Making Tax Digital for Income Tax – What You Need to Know
HMRC’s Making Tax Digital (MTD) programme is expanding, and from April 2026, sole traders and landlords earning over a certain threshold will need to follow new digital reporting rules.
Here’s what you need to know:
Who will be affected?
MTD for Income Tax Self Assessment (MTD ITSA) will be introduced in stages, based on the level of gross annual income (total sales) from self-employment and/or property (before expenses).
Implementation timetable
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From April 2026 - MTD ITSA will apply to sole traders and landlords with combined self-employment and/or property income over £50,000 per year.
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From April 2027 - The rules will extend to those with income over £30,000 per year.
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From April 2028 - MTD ITSA will further extend to those with income over £20,000 per year.
What if your income is below £20,000?
If your combined self-employment and property income is below £20,000, you will remain within the current Self Assessment system for now. HMRC has indicated that this position will be reviewed in the future, but no mandatory start date has been confirmed for this group.
What changes under MTD?
Instead of submitting one tax return per year, you'll need to:
- Keep digital records using HMRC-compliant software (like Xero or QuickBooks)
- Submit quarterly updates to HMRC of your income and expenses
- File a final end-of-year declaration
MTD will not apply to employment income, dividends, or pensions — only to self-employment and rental income
How to prepare
If you fall within the upcoming MTD thresholds, it’s important to start getting ready:
- Make sure you're using MTD-compatible software
- Review how you're currently recording your business income and expenses
- Speak to us about setting up your digital system and timelines
We’re already working with clients to make this a smooth transition, and we’re here to help every step of the way.
Need help getting started?
If you're unsure whether MTD applies to you, or if you'd like support setting up digital record keeping, feel free to get in touch. We're happy to offer tailored advice based on your circumstances.
There is also a handy checklist below to help you prepare for MTD.
Get MTD Ready – Checklist for Sole Traders & Landlords
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is coming – here’s how to prepare in advance of the April 2026 rollout.
1. Check if You’ll Be Affected
- Total income from self-employment and/or property is over £50,000 (from April 2026)
- Or, income is over £30,000 (from April 2027)
- You're currently using paper records or spreadsheets only
2. Choose MTD-Compatible Software
- Use or upgrade to MTD-approved accounting software (e.g. Xero, QuickBooks, FreeAgent, or Hammock.app for landlords)
- Ensure the software is set up to record separate income and expenses
- Enable quarterly submission features
We can advise or help you with setup if you're unsure.
3. Organise Your Digital Records
- Keep all income and expense records digitally
- Include dates, descriptions, amounts, and business categories
- Store digital copies of receipts or use software with receipt capture
4. Prepare for Quarterly Reporting
- Understand your reporting quarters (e.g. Apr–Jun, Jul–Sep, etc.)
- Set calendar reminders for due dates
- Allocate time each quarter for bookkeeping or send records to your accountant in good time
5. Speak with Your Accountant
- Confirm if you're affected by MTD
- Ask about training, software options, or moving from spreadsheets
- Ensure you're registered for MTD when the time comes
Optional: For Landlords with Multiple Properties
- Track income and expenses per property
- Use tags or categories in software to keep properties separate
Need Help?
We’re here to guide you through the process and take the stress out of going digital.
Call us on 01278 433014 or fill in the contact us form at the bottom of this page