1. What Is Making Tax Digital?
Making Tax Digital is a government initiative that requires sole traders and landlords to:
- Keep digital records
- Use compatible software
- Send quarterly updates to HMRC
The aim is to reduce errors, improve accuracy, and give you a clearer picture of your tax position throughout the year.
MTD has already started for VAT‑registered businesses, and the next stage will apply to self‑employed individuals and landlords.

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2. Who Will MTD Apply To?
MTD for Income Tax will apply to:
- Sole traders
- Landlords
- Individuals with combined business and property income above the threshold
 

3. When Will MTD Start For My Business?
HMRC looks at your income from the tax year two years before MTD starts for you.
 

For April 2026 start
HMRC looks at your 2024/25 tax year income.
If your total income was £50,000+ you must join MTD from April 2026.

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​​​​​​For April 2027 start
HMRC looks at your 2025/26 tax year income.
If your total income is £30,000+ you must join MTD from April 2027.

If your income falls below the threshold
You may be able to leave MTD, but only after a full tax year below the threshold.
Example:
If your income drops below £30,000 in 2027/28, you may leave MTD from 2028/29.
 

What If You Have a Loss?
Losses don’t matter for the threshold as HMRC looks at gross income, not profit.
Even if you made a loss, if your turnover is above the threshold, you must join MTD.

4. What Will You Need to Do Under MTD?
Once MTD applies to you, you’ll need to:

 

Sign Up for MTD Through HMRC

- Sign in using your Government Gateway
- Select “Sign up for Making Tax Digital for Income Tax”

- Enter your UTR, NI number, business type (sole trader, landlord, or both)
- Confirm your MTD‑compatible software
- Authorise your software to communicate with HMRC
Your software will guide you through the authorisation step.

 

Wait for HMRC Confirmation
HMRC will send you a confirmation message once your registration is complete.
After that, your software will be able to:
- send quarterly updates
- submit your EOPS
- submit your Final Declaration

 

Keep digital records
This means storing your income and expenses using:
- Accounting software
- A digital app
- A spreadsheet linked to MTD‑compatible software
 

Submit quarterly updates
Every three months, you’ll send HMRC a summary of:
- Income
- Allowable expenses
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Submit an End‑of‑Period Statement (EOPS)
This is where you finalise your figures for the year and make any adjustments.

The EOPS is due by 31 January following the end of the tax year.

Submit a Final Declaration
This replaces the Self Assessment tax return.
It confirms all your income for the year and calculates your final tax bill.

The Final Declaration is due by 31 January following the end of the tax year.

 

 

 

 

 

 

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5. What Counts as “Digital Records”?
- Sales invoices
- Rental income
- Expense receipts
- Mileage logs
- Bank transactions
- Any other business‑related financial information
You don’t need to upload every receipt to HMRC - you just need to keep them digitally and ensure your totals are recorded accurately.
 

6. What Software Will You Need?
You’ll need MTD‑compatible software that can:
- Record income and expenses
- Keep digital records

- Connect directly to HMRC
- Submit quarterly updates

- Submit End of Period updates

It must integrate with HMRC, and can be:

- A full accounting package

- A simple bookkeeping app

- A spreadsheet connected to bridging software
Popular options include:
- Xero
- QuickBooks
- FreeAgent
- Sage
- MTD‑enabled spreadsheets + bridging software
If you’re unsure which one suits your business, I can help you choose the right system and get everything set up.

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What Is Bridging Software?

It lets you keep using spreadsheets, but still submit your tax information digitally to HMRC.

 

7. What Are the Benefits of MTD?
Although it may feel like extra work at first, MTD can actually make life easier:
- No more last‑minute tax return panic
- Fewer errors and missed expenses
- A clearer picture of your tax position throughout the year
- Better organisation and less paperwork
- More accurate financial records
 

8. How to Prepare for MTD Now
Even if MTD doesn’t apply to you yet, it’s a good idea to start preparing early.
Here’s how:
- Move to digital bookkeeping now
- Start using MTD‑compatible software
- Keep receipts and records digitally
- Separate your business and personal finances
- Get support from an accountant
The sooner you get organised, the smoother the transition will be.

 

 

Need Help Getting Ready for Making Tax Digital?

I help sole traders and landlords:
- Set up digital bookkeeping
- Choose the right software
- Understand MTD requirements
- Stay compliant with HMRC
- Keep records organised throughout the year
If you’d like support preparing for MTD, or want to get ahead before the rules change, feel free to get in touch.

I’ll make the whole process simple and stress‑free.
 

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