Making Tax Digital for Income Tax Self Assessment (often shortened to MTD for Income Tax or MTD ITSA) is one of the biggest changes to the UK tax system for sole traders and landlords in recent years. While it may sound daunting, the aim is to make tax reporting more accurate and up to date.
What Is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax is an HMRC initiative that changes how sole traders and landlords keep records and report their income.
Instead of completing one Self‑Assessment tax return each year, those affected will need to:
- Keep digital records of income and expenses
- Submit quarterly updates to HMRC using compatible software
- Complete a final declaration at the end of the tax year
Who Will Making Tax Digital Apply To?
Making Tax Digital for Income Tax applies to sole traders and landlords, not limited companies or partnerships.
HMRC is introducing the changes in stages, based on gross income (turnover before expenses) from self‑employment and/or property:
- From 6 April 2026: income over £50,000
- From 6 April 2027: income over £30,000
- From 6 April 2028: income over £20,000
If you have both self‑employment income and rental income, these are added together when assessing the threshold.
If your income is below the relevant threshold, you can continue using the existing Self‑Assessment system for now.
What Will Change in Practice?
Under Making Tax Digital for Income Tax, you’ll need to move away from paper records or spreadsheets that aren’t connected digitally.
Digital Record Keeping
You’ll record income and expenses using HMRC‑compatible accounting software.
Quarterly Updates
You’ll submit four quarterly updates each tax year. These provide HMRC with a snapshot of how your business or rental income is performing. These updates:
- Are not tax returns
- Do not trigger a tax payment
- Can help you see an estimated tax position during the year
End‑of‑Year Declaration
At the end of the tax year, you’ll still review everything, make any necessary adjustments (such as other income or reliefs), and submit a final declaration—similar to the current Self-Assessment tax return.
When Will You Pay Your Tax?
Although reporting will be more frequent, tax payment dates are not changing.
You’ll still pay Income Tax by 31 January, just as you do now. Making Tax Digital is about how information is reported, not how often tax is paid.
What Does This Mean for Landlords?
Landlords with qualifying income will also need to keep digital records and submit quarterly updates for their rental income.
If you have more than one property, or a mix of self‑employment and rental income, you’ll keep separate records and submit updates for each income source.
How Can You Prepare?
Even if Making Tax Digital doesn’t apply to you yet, it’s worth preparing early.
You can:
- Review how you currently keep your records
- Move to suitable accounting software
- Get support to ensure everything is set up correctly
Starting early can make the transition far less stressful.
How Pears Accounting Can Help
At Pears Accounting, we help sole traders and landlords understand and prepare for Making Tax Digital in a clear, practical way.
We can support you with:
- Understanding whether and when MTD applies to you
- Setting up digital record‑keeping
- Submitting quarterly updates
- Ongoing support and advice
If you’d like help getting ready for Making Tax Digital for Income Tax, or simply want to understand what it means for you, please get in touch—we’re always happy to help.
