Making Tax Digital (MTD) is about to become a requirement for sole traders and landlords with an income over £50,000. From April 2026, you’ll be required to report your income and expenses to HMRC digitally, significantly changing how you manage your finances throughout the year.
Although intended to improve the way you handle your taxes, making the initial change can be challenging if you’re unsure where to start. Here’s what you need to know, and how you can prepare.
Why is this being done by HMRC?
The key drivers behind MTD are to reduce the risk of unintentional errors and save you time when submitting your tax return. Through digitalisation, it aims to eliminate paperwork from the process while enabling HMRC to better tailor services to customers.
Ultimately, it’s a modernisation of the tax return system that should not only make it easier to manage your taxes but give you better insight and visibility into your finances. To make your first transition to digital a smooth and error-free one, though, there are a few things you need to know first.
What are the implications for me?
The introduction of MTD for self-employed individuals and landlords means the end of traditional Self Assessment tax returns for self-employment income. If you’re one of these individuals and earning over £50,000, from April 2026 you’ll no longer need to fill in a Self Assessment return. Instead, you’ll provide digital quarterly updates to HMRC via MTD-ready software for each business you run and/or for all rental income you receive. This return must be submitted no later than 31st January following the end of the tax year.
Earning less than £50,000? Take note that MTD will come into effect for those earning over £30,000 from April 2027, and over £20,000 from April 2028.
How should I prepare?
1. Start using MTD-ready accounting software
Using MTD-ready software is a basic requirement of the digital transition. This software will have already been recognised and approved by HMRC, and equipped to help you meet all the requirements. This includes creating your digital records, submitting them to HMRC as updates, and submitting them. Already have cloud accounting software? It may well be MTD-ready. If not, free software is out there for you to use.
2. Take pictures of paper receipts
MTD-ready accounting software requires digital information of all your receipts. Don’t worry, you won’t need to enter this manually. The software you’re using will be able to create digital records either from an upload of a digital receipt or an upload of a picture of a paper receipt. From this moment forward, take photographs of all your paper receipts for the relevant tax year, and take photographs of all future paper receipts upon receiving them. This will make it easier to upload when the time comes.
3. Seek accounting support
Although designed to make the tax process easier to manage, the initial adaptation can take some getting used to. For your first upload in particular, it’s advisable to seek professional guidance. An owner-managed accountancy firm like Nabarro Poole understands the challenges you face as a self-employed business owner and can help make that first transition to MTD a smooth one.
Forward-thinking tax support with Nabarro Poole
Whether you need help getting the ball rolling with MTD or are looking for a long-term partner to support you with tax advice and quarterly management accounts, Nabarro Poole can meet you where you stand with a flexible and bespoke approach.
Your growth and success are always front and centre for us, so get in touch for a friendly chat about how we can support you towards your key business goals.
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