MTD for Income Tax is coming in April 2026 – is your small business or rental income ready?
The Countdown Has Begun
April 2026 may seem far away now, but in the world of tax compliance, it’s closer than you think. If you’re a sole trader or landlord earning over £50,000, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will soon apply to you.
That means big changes in how you keep records and report income to HMRC.
But don’t worry—this blog will guide you through what MTD ITSA is, why it matters, and how to prepare in simple, practical steps.
What Is MTD for Income Tax (MTD ITSA)?
Let’s start with the basics. Making Tax Digital is a government initiative aiming to make the UK’s tax system more effective, efficient, and easier for taxpayers.
Under MTD for Income Tax:
- You must keep digital records of income and expenses.
- You’ll send quarterly updates to HMRC instead of one big annual tax return.
- A final end-of-period statement (EOPS) and a final declaration wrap it all up at the end of the year.
Who’s Affected First?
- Sole traders and landlords
- Earning more than £50,000 annually
- From April 2026
Others earning over £30,000 will follow in April 2027. But if you’re in the first group, the clock is ticking.
Why MTD ITSA Matters to You
MTD is not just a change in process—it’s a shift in mindset. If you’ve always handled tax with paper records, spreadsheets, or once-a-year submissions, MTD ITSA will feel different.
Here’s why it matters:
1. Mandatory Digital Record-Keeping
You’ll need to keep digital records of your business income and expenses. That means:
- No more paper notebooks
- Spreadsheets? Only if they’re MTD-compatible with special bridging software
2. More Frequent Reporting
Instead of filing one Self Assessment return each January, you’ll:
- Submit 4 updates a year
- Plus an end-of-year summary
- And a final declaration confirming all income
3. Software Requirement
You’ll need MTD-compatible software like QuickBooks, Xero, FreeAgent, or specialist apps. Many of these offer automation, but they also require setup and a learning curve.
4. Penalties for Non-Compliance
HMRC will roll out a points-based penalty system. Repeated late submissions can lead to fines.
What You Should Be Doing Right Now
You don’t want to be scrambling in March 2026—get a head start. Here’s how to prepare:
✅ 1. Check Your Income
If your gross income from self-employment or property was over £50,000 in the tax year ending April 2025, you’re in.
Even if you’re close to the threshold, it’s worth preparing early.
✅ 2. Choose the Right Software
You’ll need a digital tool that:
- Is compatible with MTD ITSA
- Lets you record income/expenses digitally
- Can send quarterly updates directly to HMRC
Look for one that matches your business type and budget.
💡 Need help choosing software? CW Licensed Bookkeeper & Accountant can guide you.
📧 info@cwabc.co.uk | 📞 07306 812321
✅ 3. Get Comfortable With Quarterly Updates
Start practicing now. Record your income and expenses monthly, and review them quarterly. Use dummy reports to get a feel for how quarterly updates will look.
✅ 4. Digitise Your Records
Scan receipts, switch from paper to digital invoices, and track mileage using apps. The more you digitise now, the easier your MTD transition will be.
✅ 5. Speak to a Professional
If you’re unsure where to start, don’t go it alone. A licensed bookkeeper or accountant can:
- Help you choose software
- Set up digital record systems
- Train you on quarterly updates
Common Myths About MTD ITSA (And the Truth!)
There’s a lot of confusion out there. Let’s clear up a few myths:
❌ Myth 1: “I can still file a paper return.”
Not true. If you’re over the income threshold, digital filing is mandatory.
❌ Myth 2: “It’s just more red tape.”
Actually, many small businesses find they get better visibility over their finances with quarterly updates.
❌ Myth 3: “I’ve got ages to prepare.”
Ten months may seem like a while, but setting up systems, learning new software, and building new habits all take time.
Benefits of Going Digital (Yes, There Are Some!)
It’s not just about compliance—MTD can help you run your business better.
📈 Better Financial Insight
You’ll see your numbers more often. That means better decision-making, spotting trends early, and managing cash flow more easily.
💷 Easier to Claim Expenses
Digital records = less paperwork = fewer missed claims.
🕒 Saves Time at Year-End
No more mad dash to find receipts. Your records are already tidy.
💼 Looks More Professional
Digital invoicing and reporting can help you look more polished to clients and lenders.
What If You’re Not Quite Ready?
If you’re overwhelmed, you’re not alone. Here’s a simple roadmap:
- Book a free initial chat with a professional.
- Choose a software trial.
- Digitise one part of your workflow (like invoicing).
- Do a mock quarterly update for practice.
- Review your results and adjust.
You don’t need to be perfect—just moving in the right direction.
Conclusion: Don’t Wait Until the Last Minute
The new era of tax reporting is almost here. With just over 10 months to go, the best time to prepare for MTD ITSA is now.
Starting early means:
- Less stress
- More time to test and adapt
- And the confidence that you’re ready
Need Help? Let’s Chat
CW Licensed Bookkeeper & Accountant is here to help you make a smooth transition to MTD.
We offer tailored advice, software setup, and friendly support to get you MTD-ready—without the jargon.
📧 info@cwabc.co.uk
📞 07306 812321