With the new tax year approaching, many businesses and individuals are preparing for the next phase of Making Tax Digital (MTD).
From April, sole traders and landlords with annual income exceeding £50,000 will be required to submit quarterly updates to HMRC using compatible software. It is estimated that around 900,000 individuals will be brought into the regime from the outset, making this a significant change for those affected.
Early preparation is widely considered key, particularly for those who have not previously maintained digital records.
The requirement to use approved software
Under MTD, paper records and manual submissions will no longer be sufficient. Taxpayers must use accounting software that is approved by HMRC and capable of submitting information directly.
While this is primarily a compliance requirement, digital record-keeping can offer wider benefits. Many software platforms help streamline bookkeeping, improve cashflow forecasting, support better financial decision-making and reduce the risk of errors. For this reason, it is worth considering functionality and long-term suitability when choosing a system, rather than focusing solely on MTD compliance.
Registering for Making Tax Digital
HMRC will contact taxpayers who need to prepare for MTD based on their tax return information. However, registration is not automatic.
Affected individuals must sign up themselves and ensure this is done within the required timeframe to avoid potential issues once the new rules take effect.
Exemptions from MTD
Some taxpayers are automatically exempt from MTD, including trustees and personal representatives of deceased taxpayers. In these cases, there is no requirement to sign up.
There are also circumstances where an exemption can be applied for, depending on individual circumstances. HMRC will usually advise where an automatic exemption applies, but it may be prudent to check whether an application is possible in other cases.
What if income is below £50,000?
MTD is being introduced in stages. The current timetable for sole traders and landlords is as follows:
- 6 April 2026: Income above £50,000
- 6 April 2027: Income above £30,000
- 6 April 2028: Income above £20,000
Those who fall below these thresholds can choose to join MTD voluntarily if they wish.
Does MTD apply to partnerships?
At present, partnerships are not required to operate under MTD for income tax. However, HMRC has confirmed that partnerships will be brought into the regime in the future, with further details and timings to be announced.
Support and guidance
For those affected, choosing appropriate software and adapting to quarterly reporting can be complex. Professional support can help with software selection, HMRC registration, ongoing bookkeeping and the submission of quarterly and end-of-year returns.
Further guidance and updates will continue to emerge as MTD implementation progresses.
Take a look at our MTD for IT webpage and download our handy guide here.
