From April 2026, sole traders and landlords with annual income over £50,000 will be required to follow new rules under Making Tax Digital (MTD) for Income Tax. If that’s you, it’s time to start preparing – this is one of the biggest changes to Self-Assessment in years.
We’ve pulled together everything you need to know, in plain English.
What’s Changing – And When?
HMRC is rolling out MTD for Income Tax in stages:
- From April 2026 – those with income over £50,000
- From April 2027 – threshold drops to £30,000
- From April 2028 – it drops again to £20,000
This means you’ll need to:
- Keep digital records using MTD-compatible software
- Submit quarterly updates to HMRC of your income and expenses
- File an end-of-year digital return, replacing the current Self-Assessment form
It’s a big shift from the once a year routine many are used to, and yes – it will take some adjustment.
What’s the Point?
HMRC’s goal is to modernise the tax system by reducing errors and improving efficiency. For some, that might mean:
- A clearer view of your tax position throughout the year
- Fewer year end headaches if you keep things up to date
- Less risk of mistakes if everything’s recorded correctly
But there are some challenges too.
What You Need to Watch Out For
- Admin overload: You’ll be submitting four updates a year plus an annual return
- Learning curve: Especially if you’re new to digital bookkeeping
- Software costs: You’ll need MTD compliant accounting software
And remember – even if you have just a few transactions a year, you’ll still need to comply if your qualifying income is over the threshold.
FAQs – Quick Answers to Common Questions
What counts as ‘qualifying income’?
Your total income (before expenses) from self-employment and property. This doesn’t include income from employment or savings.
Do I need to pay tax quarterly too?
Nope – tax payment deadlines haven’t changed. You’ll still pay by 31 January (and 31 July if applicable).
What if I already submit VAT returns?
You may want to align your VAT quarters with MTD updates to simplify things.
Is there any flexibility for smaller businesses?
Yes – if your turnover is under £90,000, you can submit simpler summaries each quarter (total income and total expenses). But you still need to log each transaction digitally.
What if I don’t comply?
Penalties will apply – including for missing updates or not keeping digital records. HMRC can fine up to £3,000 per quarter, so it’s worth getting set up early.
How We Can Help
This change doesn’t need to be stressful – and you don’t have to figure it all out on your own.
At OJW, we’re already helping clients make the switch. Whether it’s choosing the right software, setting up digital records, or simply explaining what it all means, we’ve got your back.
As Dext and Xero partners we recommend these solutions to take the hassle out of bookkeeping and stay on top of your records. These tools are designed to make your day-to-day accounting simpler, faster and more accurate. There are plenty of other providers out there and we are more than happy to discuss these with you. If you’d like to explore how they could work for your business, we’d be happy to chat, just get in touch for a free consultation.
Want to get ahead of the changes? Let’s chat about how MTD will affect you and what steps to take now. Get in touch today on 01527 368220 or via email at info@ojwassociates.co.uk and we’ll help you get MTD ready with confidence.
