MTD Income Tax: A Guide for Small Businesses

At FR Accounting Consultants, we understand that the upcoming changes to the tax system, especially with the implementation of Making Tax Digital (MTD) by April 2026, are a significant concern for sole traders and landlords. 

Making Tax Digital (MTD) for Income Tax Self Assessment requires sole traders and landlords to maintain digital records and submit quarterly reports to HMRC using compatible software, rather than filing a single annual Self Assessment. 

Who and When

Eligibility is based on your gross "qualifying income" (combined turnover from self-employment and property before expenses, not taxable profit): 

• April 2026: Mandatory for incomes over £50,000
• April 2027: Mandatory for incomes over £30,000
• April 2028: Mandatory for incomes over £20,000

Key components of MTD for Income Tax:

• Digital record-keeping: Taxpayers will be required to keep digital records of their income and expenses.
• Quarterly updates: Regular submissions that provide a summary of business activity to HMRC.
• End-of-year reporting: A final declaration after the submission of quarterly updates for necessary adjustments, such as accounting or tax reliefs.