From 6 April 2026, the major change under Making Tax Digital (MTD) for Income Tax Self-Assessment (MTD for ITSA) comes into effect in the UK. This is a significant update to how certain self-employed individuals and landlords report their income to HMRC.
Who is affected from April 2026?
This first phase applies to sole traders and landlords (individuals, not partnerships) whose combined gross qualifying income (before expenses) from self-employment and/or property rental exceeds £50,000 in the 2024/25 tax year.
• HMRC reviews your Self-Assessment return (due by 31 January 2026 for 2024/25) to determine this.
• If your income meets the threshold, HMRC will notify you (often via letter) that you must join MTD from 6 April 2026.
• Around 780,000 tax payers are expected to be in scope for this initial phase.
Key changes from6 April 2026
Instead of filing one annual Self-Assessment tax return, affected taxpayers must:
• Keep digital records of income and expenses (no more paper records allowed for these businesses).
• Use HMRC-compatible software (such as cloud-based accounting tools like Xero, QuickBooks, or bridging software for spreadsheets) to submit data digitally.
• Submit quarterly updates summarising income and expenses (not full tax payments at this stage – these are informational summaries).
• Deadlines are typically the 7thof the month after each quarter ends(e.g., 7 August, 7 November, 7 February, and 7 May for tax-year aligned quarters).
• Submit an End of Period Statement and Final Declaration at the end of the tax year (by31 January following the year-end), which replaces the traditional Self-Assessment return and confirms your final tax liability.
This aims to make tax reporting more real-time, reduce errors, and help you stay on top of your tax position throughout the year.
Future phases
• From April 2027: The threshold drops to £30,000 (affecting more people).
• From April 2028: It is planned to drop further to £20,000(subject to legislation).
Partnerships and those with very low income (below the thresholds) are not yet included, and some exemptions apply (e.g., certain carers or those with specific allowances).
How to prepare
1. Check your 2024/25 income to see if you’re affected.
2. Choose and test MTD-compatible software early.
3. Contact us so we can recommend the best solution for your business and sign you up for MTD via HMRC’s online service
This is the biggest change to Self-Assessment in decades, so early preparation is key!
Here’s a list of some of the most popular and HMRC-recognised MTD-compatible software options for Making Tax Digital for Income Tax Self-Assessment(MTD for ITSA).
Popular Full Accounting Software (End-to-End: Digital Records + Quarterly Updates + Year-End Submission)
These cloud-based tools handle everything from record-keeping to direct HMRC submissions:
- Xero — Widely used by small businesses, sole traders, and accountants; excellent bank feeds, invoicing, and MTD support for both VAT and Income Tax.
- QuickBooks — User-friendly with AI features; great for sole traders, includes Self Assessment tools and MTD compliance.
- FreeAgent — Award-winning and often free for some bank accountholders (e.g., NatWest); strong for freelancers, contractors, and landlords.
- Sage — Trusted UK brand with scalable plans; supports invoicing, expenses, and full MTD for Income Tax.
- Clear Books — Friendly and cost-effective; offers free or low-cost options for sole traders and landlords, with easy one-click submissions.
Bridging Software (Connects to Existing Records like Spreadsheets/Excel)
Ideal if you prefer to keep using spreadsheets for day-to-day records:
- Various bridging tools connect to Excel/Google Sheets and handle submissions. We have our own bridging software which you can use to submit your quarterly returns.
- Please contact us for help with the set up.
Tips for choosing:
- For simple needs (e.g., basic sole trader or single-property landlord) use our bridging software
- For growing businesses or multiple income streams → Go with Sage,Xero, QuickBooks, or FreeAgent.
- Ensure the software supports both self-employment and property income if you have both.
As we’re now just months away from the first mandatory start date, it’s time now to prepare.
Personal tax planning
[insert firm name] can help with the complex issue of personal tax, we know it can be difficult to understand, which is why we help every step of the way. We take away the time and stress by creating a tax planning strategy that suits your tax affairs, helping ensure you pay the least amount of tax. Our team will advise when payments are due along with what forms need to be filed and returned to keep you compliant.
Capital gains tax
You may be looking at investments, a second property or another asset and our team can make sure you maximise your exemptions while simplifying the difficult area of capital gains tax.
Self assesment
Our tax services make sure that your tax liability is calculated taking into account all allowed exemptions and deductions. We simplify the process by using accountancy software to accurately complete tax returns and calculate any tax liability that may occur, along with any payments that need to be made.
Corporation tax
Corporation tax reliefs and rates change annually, so we ensure that we can provide all the right guidance and advice when looking at exemptions, allowances and deductions that may be available. We will thoroughly review and prepare corporation tax returns in great detail in order to ensure you are compliant and that you don’t incur any penalties.
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