From April 2026, a big change is coming for sole traders and landlords who earn over £50,000 a year. Instead of filing an annual tax return, you’ll need to keep digital records and send quarterly updates to HMRC as part of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA).
Sounds complicated? It doesn’t have to be! This guide will break it down in plain English so you know exactly what to do and how to prepare.
What is Making Tax Digital (MTD) for Income Tax?
Right now, most sole traders and landlords submit their income tax through Self Assessment once a year. Under MTD, this will change.
👉 Instead of one big tax return, you’ll need to report your earnings every three months through Xero or another MTD-approved software.
The idea behind MTD is to make tax reporting easier and more accurate—but it does mean some extra steps for you.
Who Needs to Sign Up for MTD?
✔️ From April 2026, if your income from self-employment and/or rental properties is £50,000 or more, you must follow MTD rules.
✔️ From April 2027, the threshold lowers to £30,000.
✔️ If you earn below £30,000, MTD won’t apply yet, but HMRC may bring you into the system later.
💡 Remember: The £50,000/£30,000 limit includes all self-employment and rental income before expenses, so be sure to check your total earnings!
How Does MTD Work?
Instead of one big tax return, MTD means more regular updates. Here’s what will change:
✅ Keep digital records – No more paperwork! You’ll need to track your income and expenses using MTD-compliant software like Xero.
✅ Submit updates every three months – You’ll send your income and expenses to HMRC four times a year.
✅ End-of-year submission – At the end of the tax year, you’ll confirm all your figures and submit any final adjustments.
⏳ When does this start?
- Your first quarterly update will be due by July 2026 (covering April–June 2026).
- Your final submission for 2026/27 will be due in January 2028.
What You Need to Do Now
Even though MTD starts in 2026, getting ready early will make life much easier. Here’s how:
1. Check if MTD applies to you
If your income from self-employment and/or rental properties is over £50,000, you must sign up for MTD from April 2026. If it's over £30,000, you'll join from April 2027.
2. Start using digital bookkeeping (Xero is best!)
Spreadsheets won’t be enough—you need MTD-compliant software like Xero, which:
✔️ Connects to your bank to track income & expenses
✔️ Automatically calculates VAT & tax liabilities
✔️ Submits reports to HMRC in just a few clicks
💡 We can set up Xero for you and make sure you’re fully MTD-compliant!
3. Prepare for quarterly tax updates
Instead of scrambling to file one big tax return, you’ll need to stay on top of your numbers year-round. If that sounds like a hassle, we can handle your bookkeeping and filings for you.
How We Can Help You Get MTD-Ready
🚀 The good news? You don’t have to do this alone.
At Accountr we’re here to make tax simple with:
✔️ Xero Setup & Training – We’ll get you started with the best MTD-compliant software.
✔️ Quarterly Tax Filings – No stress! We handle your submissions for you.
✔️ Bookkeeping & Tax Support – Stay organised with expert help all year round.
✔️ Real-Time Financial Insights – Get a clear picture of your income, expenses & tax liabilities anytime.
🔹 Want stress-free tax compliance? Let us do the hard work while you focus on running your business.
Book a Discovery Call today to see how we can help: BOOK DISCOVERY CALL HERE
FAQs: Your Questions Answered
1. What if my income is below £50,000?
For now, you don’t have to sign up for MTD unless your income is £50,000+ (or £30,000+ from 2027). But if you’re close to the limit, it’s worth preparing early.
2. Do I need to use Xero?
You don’t have to use Xero, but you must use an HMRC-approved software. We recommend Xero because it’s simple, affordable, and fully MTD-compliant.
3. What happens if I don’t comply with MTD?
HMRC will issue penalties for non-compliance, so it’s important to sign up in time and submit your quarterly reports correctly.
4. Will I still need to file a tax return?
Not in the same way! Instead of a single tax return, you’ll submit quarterly updates plus an end-of-year submission to finalise your figures.
5. Do I need to submit receipts and invoices?
No, but you must keep digital records of all income and expenses. If HMRC ever asks for details, you’ll need to show them.
6. What if my income is just above the threshold one year but drops below the next?
Once you’re in the MTD system, you must stay in it, even if your income falls below the threshold later on.
7. Can I sign up for MTD voluntarily before 2026?
Yes! If you want to get ahead and test out MTD before it becomes mandatory, you can opt in early. This gives you time to get comfortable with the system.
8. Will I need to pay tax more often under MTD?
No, there is no change to when tax is paid. You will still:
- Make tax payments once a year, by 31st January (or also 31st July if you make payments on account).
- Submit quarterly updates, but these are just for reporting—your tax bill is still due annually.
💡 Future changes? HMRC has talked about introducing more frequent tax payments, but nothing has been confirmed yet. If that happens, we’ll keep you updated!
Next Steps: Let’s Make This Easy for You
Making Tax Digital doesn’t have to be stressful. With the right tools and support, it can actually make tax simpler and more predictable.
✅ Want expert help getting MTD-ready?
📅 Book a FREE Discovery Call today.
