You may have heard about Making Tax Digital (MTD) before. In fact, many people feel like they've been hearing about it for years. That's because the plans have been delayed more than once. Naturally, this has led some people to assume it may never actually happen.
HMRC have now confirmed that Making Tax Digital for Income Tax will begin on 5 April 2026, and the rollout will happen in stages over the following years. For many sole traders and landlords, it will change how tax information is recorded and reported.
While the idea of a new system can feel unsettling, the reality is that with the right preparation, it should be manageable.
What Making Tax Digital actually is
Making Tax Digital is the government's plan to modernise the UK tax system. Instead of relying on paper records or a once-a-year tax return, businesses and landlords will keep digital records and send information to HMRC throughout the year.
The first stage of this project was MTD for VAT, which began in 2019 and now applies to all VAT-registered businesses.
The next stage is MTD for Income Tax, which will affect many people who currently complete a Self Assessment tax return.
Rather than submitting one annual return covering the whole year, those within the scheme will provide updates to HMRC during the year and then confirm everything at the end of the tax year.
Who will need to follow the new rules?
A common misunderstanding is that Making Tax Digital will apply to everyone who currently submits a Self Assessment tax return. That isn't the case.
The rules apply specifically to sole traders and landlords, and they will be introduced gradually depending on income levels.
From 6 April 2026, anyone earning more than £50,000 from self-employment and/or property income will need to follow the new system.
From April 2027, the threshold will reduce to £30,000, and from April 2028 it will drop again to £20,000.
Importantly, these thresholds are based on total income before expenses, not profit.
Any other types of income such as employment income, dividends, pensions or savings interest are not included when working out whether you fall within the scheme.
How the new reporting will work
At the moment, most sole traders and landlords submit a Self Assessment tax return once a year. This covers the previous tax year and must be filed by 31 January.
Under Making Tax Digital, the process becomes more regular.
You will send HMRC four updates each year, summarising your income and expenses for that period. These updates are based on quarterly reporting periods throughout the tax year.
If you follow the standard tax-year quarters, the reporting deadlines will usually be:
- 7 August
- 7 November
- 7 February
- 7 May
Each update must be submitted within one month of the quarter ending.
At the end of the tax year there will still be a final step. By 31 January, you will confirm the full position for the year, make any adjustments and submit a final declaration. This replaces the traditional Self Assessment tax return.
The timing of tax payments is not changing. Any tax owed will still be due by 31 January, with payments on account continuing as they do now.
Digital record-keeping will be required
One of the biggest practical changes is that records must be kept digitally.
HMRC requires taxpayers within the scheme to use MTD-compatible software to record their income and expenses and send updates directly to HMRC.
HMRC does not provide its own software. Instead, businesses must use software from commercial providers that connects to HMRC's systems.
Many modern accounting platforms already offer these features, including bank feeds, digital invoicing and expense tracking. While spreadsheets can still be used in some cases, they must connect to HMRC through bridging software to meet the digital record requirements.
A few common misunderstandings
Making Tax Digital has been discussed for so long, there are several myths about how it works.
One concern we often hear is that people will have to pay tax every three months. This isn't the case. The quarterly updates are simply reports of income and expenses. The timing of tax payments remains the same as under the current Self Assessment system.
Another misunderstanding is that everyone must comply straight away. In reality, the changes only apply once your qualifying income passes the relevant threshold, and you will join the system from the start of the following tax year.
Why preparation now will help
Although you may not need to move to MTD just yet, the transition will be much easier if you are already keeping digital records before you have to.
Getting comfortable with bookkeeping software and regular record-keeping now can make the eventual move to quarterly reporting far smoother.
For many businesses, it can also provide a clearer picture of how the business is performing during the year rather than waiting until the year has ended.
How GMP can support you
Changes to the tax system often bring uncertainty, particularly when new technology is involved.
At GMP, we are already helping clients prepare for Making Tax Digital. We can advise on suitable software, help you move your records into a digital format, and ensure that reporting is completed accurately and on time.
Most importantly, we make sure that the new requirements fit smoothly into the way you already run your business.
If you would like to talk about how Making Tax Digital may affect you, our team would be very happy to help.