Making Tax Digital (MTD) for Income Tax is the biggest change to Self Assessment in decades. Instead of one tax return a year, sole traders and landlords in scope must keep digital records and send HMRC a summary of their income and expenses every quarter, using software that works with MTD.
Who has to join, and when
Whether you are in scope depends on your qualifying income: your total gross income from self-employment and property, before expenses. HMRC looks at the Self Assessment return for an earlier tax year to decide your start date.
| Qualifying income | Based on tax year | MTD starts |
|---|---|---|
| Over £50,000 | 2024 to 2025 | 6 April 2026 |
| Over £30,000 | 2025 to 2026 | 6 April 2027 |
| Over £20,000 | 2026 to 2027 | 6 April 2028 |
If your income is over £50,000, you should already be keeping digital records. If it is between £30,000 and £50,000, you have until April 2027 to get ready. Limited companies are not affected by MTD for Income Tax.
What changes in practice
- Digital records: income and expenses must be recorded in MTD-compatible software, not just on paper or in a spreadsheet that is not linked to HMRC.
- Quarterly updates: a summary of each quarter's figures is sent to HMRC, normally by the 7th of the month after the quarter ends (7 August, 7 November, 7 February and 7 May).
- Final declaration: after the tax year, you confirm your figures and add any other income. This replaces the traditional tax return and is due by 31 January.
Tip: quarterly updates are only as good as the records behind them. Reconciling your bank account every month makes each submission quick and accurate, and means no surprises at year end.
How to get ready
- Check your qualifying income on your latest Self Assessment return, adding self-employment and property income together.
- Choose MTD-compatible software such as QuickBooks Online, Xero or Sage, and connect your bank feeds.
- Separate business and personal spending with a dedicated business bank account if you do not already have one.
- Set a routine for recording income and expenses weekly or monthly, rather than once a year.
- Get support if you would rather not do it yourself. A bookkeeper can keep your records up to date and prepare each quarterly update for you.
How OBE Financial Services can help
We set up and maintain your digital records in QuickBooks Online, Xero or Sage, reconcile your accounts every month and prepare your quarterly figures, so MTD becomes a routine rather than a worry.
This article is general information for UK businesses, correct at the date of publication. It is not tax or legal advice. Rules and rates change, so check the latest guidance on GOV.UK or speak to us about your circumstances.