Making Tax Digital for Income Tax (MTD for ITSA) becomes mandatory from April 2026 for self-employed individuals and landlords whose combined gross income from trading and property exceeds £50,000.
If you’re earning above this threshold, the clock is well and truly ticking.
You’ll need to maintain digital records and submit updates to HMRC four times a year, with a year-end declaration that replaces the traditional tax return.
Whether you’re in the first wave or the second, now is the time to start preparing. Here are five practical steps to get your tax affairs ready.
Step 1: Work Out If You’re Affected
Before you do anything else, determine whether MTD for Income Tax applies to you. The answer depends on your ‘qualifying income’ – the combined gross turnover from your self-employment and property rental businesses before any expenses are deducted.
Your mandation date is determined by the tax return filed before that date. For example, if you’re potentially affected from April 2026, HMRC will look at your 2024/25 tax return due on 31 January 2026. If that return shows gross qualifying income exceeding £50,000, you’ll need to join MTD from 6 April 2026 – just over two months later.
This means you need to review your income carefully. If you’re a sole trader earning £30,000 and you also receive £21,000 in gross rental income from a buy-to-let property, your qualifying income is £51,000 – that counts.
Don’t assume you’re exempt just because your self-employment earnings alone sit below the threshold.
To determine if you’re affected, check whether you fall into any of these categories:
- April 2026 mandate: Gross qualifying income over £50,000 on your 2024/25 tax return
- April 2027 mandate: Gross qualifying income between £30,000 and £50,000 on your 2025/26 tax return
- Exempt: Foster carers, those digitally excluded, due to religious beliefs, and a few others – check other eligibilities now
Most people need to apply for exemption.
Step 2: Understand What MTD Requires
MTD for ITSA has three core components: digital record-keeping, quarterly updates, and a year-end declaration.
Every transaction related to your business income and expenses must be recorded digitally in compatible software. That will usually be with specific MTD-compliant software (Xero, Sage, QuickBooks, etc).
Quarterly updates require you to submit summaries of your income and expenses to HMRC at least four times during the tax year. These aren’t tax calculations – they’re cumulative updates showing your total income and expenses for the year so far.
The year-end declaration replaces your current Self-Assessment tax return for your self-employment and property income.
You’ll need to submit this by 31 January following the end of the tax year, just as you do now. This is where you’ll make final accounting adjustments, claim reliefs, and declare other income sources beyond your business activities.
Here’s what you’ll need to manage under the new system:
- Digital record-keeping: All business transactions recorded in MTD-compatible software from day one
- Quarterly submissions: Four cumulative updates per year showing income and expenses to date
- Year-end declaration: Final return by 31 January, including accounting adjustments and other income sources
Step 3: Sort Out Your Software Situation
You’ll need to source compatible software yourself, and you have several options depending on your circumstances and technical confidence.
Full accounting software packages offer the most comprehensive solution. Products like Xero, QuickBooks, FreeAgent, and Sage all support MTD for Income Tax. These platforms handle everything from transaction recording to quarterly submissions and year-end declarations.
They’re particularly useful if you already use accounting software for VAT or general bookkeeping.
For those with simpler affairs or using bespoke systems, spreadsheet-based solutions with bridging software might be more appropriate. You can maintain your records in Excel or Google Sheets, then use bridging software to convert and submit this information to HMRC in the required format.
Factor this into your business expenses and treat it as an investment in staying compliant.
Step 4: Get Your Records in Order Now
Even if April 2026 feels far away, the transition to digital record-keeping takes longer than you think. Start building good digital habits now rather than attempting a frantic conversion later.
Begin by reviewing your current record-keeping system. If you’re still using paper invoices, receipt books, or manual systems, you need to digitise immediately. Set up a consistent process for capturing and categorising every business transaction as it happens, not at the end of the month or quarter.
To build a solid digital record-keeping system before MTD starts, focus on these practical actions:
- Digitise all income sources: Record every sale, invoice, and payment received through your software or spreadsheet
- Capture expenses immediately: Photograph receipts, log costs, and categorise expenditure as transactions occur
- Reconcile monthly: Match your digital records against bank statements to catch errors early
- Create clear categories: Set up expense and income categories that align with how you’ll report to HMRC
- Establish routines: Dedicate specific time each week or month to update records before they pile up
Bank reconciliation becomes more important under MTD. Regular reconciliation between your bank statements and your digital records helps catch errors early and ensures your quarterly updates reflect reality.
Monthly reconciliation is ideal, but at minimum, do this before each quarterly submission.
Step 5: Review Your Support and Advice Arrangements
Assess whether you need professional support to manage this change. If you currently handle your Self-Assessment returns yourself, consider whether quarterly compliance and digital record-keeping fit realistically into your schedule.
Many business owners find that the time and mental energy required for quarterly compliance make professional help worthwhile.
If you already work with an accountant, discuss your MTD strategy with them now. They need to understand your business structure, income patterns, and specific circumstances to provide effective support.
Ask specific questions about what you need to provide and when. How will fees change under the new system? What records must you maintain, and what will they manage?
Taking Action Before April 2026
For now, review your income to confirm whether you’re affected. Research and select appropriate software. Begin digitising your record-keeping processes. Consider professional support options.
These aren’t tasks you can knock out in an afternoon! They require thoughtful implementation and, often, changing long-established habits.
At Double Point, we’re helping clients across all sectors prepare for Making Tax Digital for Income Tax. Our chartered accountants understand both the technical requirements and the practical challenges this change presents for busy business owners and landlords.
Book a consultation with our friendly team today to discuss your preparation strategy and ensure you’re ready when the mandatory date arrives.