UPCOMING CHANGES FOR SELF EMPLOYED: HMRC'S MAKING TAX DIGITAL FOR INCOME TAX (MTD IT)

Big changes are on the way for certain sole traders (or 'self employed') and buy-to-let property owners. From 6 April 2026, HMRC will start rolling out Making Tax Digital for Income Tax (MTD IT) – a new way to keep business records and report your income and expenses.

It might sound like more admin, but with the right software and support, it can make managing your finances simpler and more organised. In this article, we’ll explain what’s changing, when it affects you, and how to get prepared – plus how we can take the stress out of MTD for you.

WHAT IS MAKING TAX DIGITAL FOR INCOME TAX (MTD IT)?

MTD IT is HMRC’s new system for reporting business activity. If you’re self-employed or earn income from property, you’ll need to keep digital business records and send updates to HMRC through MTD-compliant accounting software.

Instead of sending one self-assessment tax return a year, you’ll additionally need to file quarterly updates summarising your income and expenses, followed by an annual summary. Note that this does not replace the current annual self assessment tax return. Followed by an annual summary.

Why is this change happening? HMRC’s aim is to make tax reporting more accurate and reduce mistakes. For you, it means a bit of a change in how you keep records – but once you’re set up, it can help you stay on top of your finances throughout the year instead of scrambling at tax return time.

We’ll talk you through exactly what you need to do and when, and if you’d rather not deal with it yourself, we can manage the whole process for you.

WHEN DO YOU NEED TO START?

The date you need to start using MTD IT depends on your annual turnover. HMRC is rolling it out gradually. 

• 6 April 2026 – if your turnover from your 2024/25 tax return is over £50,000

• 6 April 2027 – if your turnover from your 2025/26 tax return is over £30,000

• 6 April 2028 – if your turnover from your 2026/27 tax return is over £20,000

Note: Your turnover is your total sales, before expenses are taking off. It is this figure which HMRC uses to determine who is and is not in scope for MTD for IT.

Example: If you’re a self-employed consultant earning £52,000 and you have allowable expenses of £15,000 per year, that means your profit is £37,000. However, with your turnover being greater than £50,000, you will be in scope for the implementation starting 6 April 2026. That means your first quarter will be from 6 April 2026 to 5 July 2026, with your first filing deadline on 7 August 2026, you’ll need to start submitting quarterly updates. For example: The first quarter will be from 6 April to 5 July, and the filing due by 7 August. If you’re not sure which category you fall into, we can check this for you and help you get ready in plenty of time.

WHAT WILL YOU NEED TO DO EACH QUARTER?

Once you have identified when you need to start reporting under MTD for IT, here’s what the process will look like for each business you run:

1. Keep your records in MTD-compliant software – ideally linked to your business bank account.

2. Explain your transactions – the software will show money coming in and out, and you’ll need to categorise it (e.g., sales, travel, bank charges). You can attach receipts or invoices directly in the software or app.

3. Submit quarterly updates to HMRC – these are summaries of income and expenses, not every single transaction.Note: HMRC can not see every single transaction line, only summarised groupings of transactions.

4. Complete your annual ‘End of Period Statement’ (EOPS) – due by 31 January after the tax year.

5. Submit a final declaration – also by 31 January, similar to today’s self-assessment.

Example: For the tax year ending 5 April 2027, your first EOPS and final declaration would both be due by 31 January 2028.

Don’t worry if this sounds like a lot,  with the right setup, it can run smoothly. And if you prefer, we can take care of the whole process for you.

WHAT SOFTWARE SHOULD YOU CHOOSE? 

There are plenty of MTD-compliant accounting software options, and the right choice depends on how you run your business. Some work best for service-based businesses, while others are better if you need to track lots of expenses or stock.

We have good relationships with a number of major software providers, so we can help you choose the software that suits you best, set it up correctly, and show you how to use it – or manage it all for you if you’d rather not get involved.

(If you’re already using accounting software, we can also check if it’s MTD-ready and help you switch if needed.)

HOW CAN YOU GET PREPARED NOW?

The good news is you’ve got time to get organised before MTD IT kicks-in. Here’s how to make the transition easier:

1. Open a dedicated business bank account – keeping business and personal spending separate makes quarterly updates much simpler.

2. Start keeping digital records now – even if you’re not required to join MTD yet, getting used to software early will save you stress later.

3. Keep all receipts and invoices organised – scan or upload them straight into your software or an app.

4. Know your start date – check which turnover band you fall into so you’re ready ahead of time.

5. Talk to your accountant early – the sooner we plan your setup, the smoother it will be.

Getting into these habits now means that when MTD IT becomes mandatory, you’ll already be ahead of the game.

OUR SUPPORT AS YOUR ACCOUNTANT

Switching to Making Tax Digital for Income Tax doesn’t have to be complicated. We’re already helping self-employed clients get MTD-ready, and we’ll make sure the process is as simple as possible for you.

Whether you just need advice on the right software, a bit of training, or full support where we handle everything for you, we offer different levels of help to suit your needs.

WANT TO TAKE THE STRESS OUT OF MTD for IT?

Get in touch to understand more about how we can help you through this turbulent time of change.