Making Tax Digital (MTD): Are You Ready for 2026?

HMRC is fundamentally changing how sole traders and landlords report their income. Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is the biggest shake-up to the tax system in decades. Here is what you need to know to stay compliant.

1. What is MTD for ITSA?

Currently, most self-employed individuals file one tax return per year. Under MTD, you will be required to keep digital records of your income and expenses and send quarterly updates to HMRC using compatible software.

2. Who is Affected and When?

From April 2026, self-employed individuals and landlords with a total business or property income above £50,000 must comply. Those with income between £30,000 and £50,000 will follow in April 2027.

3. Quarterly Updates vs. Annual Returns

Instead of a single "January rush," you will submit four summary updates per year. At the end of the tax year, you will then submit a final declaration to confirm your total income and claim any reliefs or adjustments.

4. The Importance of Software

You can no longer use paper records or simple spreadsheets to file your taxes under MTD. You must use "functional compatible software" that can connect directly to HMRC’s systems via an API.

5. How to Prepare Now

Review your current bookkeeping methods today. If you are still using manual systems, now is the time to migrate to the cloud. This ensures your data is accurate, digital, and ready for the 2026 transition.