Making Tax Digital for Income Tax: What you need to know
The big change you can’t ignore.
Making Tax Digital (MTD) for Income Tax is coming, and if you’re self-employed or a landlord, it is very likely to impact you.
Although it’s about tax, it’s really about how you keep your financial records and a change to the information HMRC wants to see, and when. Ultimately you will need to ensure that you are using MTD for Income Tax compatible software to record all of your income and expenses throughout the year.
At Sub-Tax Accounting Services, we’re here to help you make the transition as simple, stress-free and beneficial to you as possible, which is why it’s important to understand the requirements and what you need to do next.
Who does MTD for Income Tax apply to?
If you’re self-employed or a landlord with total business and/or rental income over:
£50,000 a year, you will start from April 2026 - £30,000 a year, you will start from April 2027
- £20,000 a year, you will start from April 2028
If you have multiple income sources of self-employment and property rental, they count together towards these thresholds.
And although those dates sound a way off yet, you have to start acting now to be properly prepared.
What’s changing?
At the moment you might track your income and expenses in a notebook, spreadsheet, apps on your phone, or even just rely on bank statements. But under Making Tax Digital for Income Tax, you will need to:
Record your income and expenses digitally using Making Tax Digital for Income Tax compatible software as you go along.
Submit quarterly updates to HMRC with a summary of your earnings and expenses.
At the end of the year, finalise everything and confirm it’s correct with a ‘Confirmation Statement’.
What’s staying the same?
You still need to track income and expenses.
The end-of-year tax process remains; you still have to make sure a Tax Return is submitted (this is the Confirmation Statement).
The deadlines for paying your tax aren’t changing.
How Making Tax Digital for Income Tax can actually benefit you
At first this might sound like extra admin but done right, Making Tax Digital for Income Tax should actually be of benefit.
Easier client and cash flow management
Being able to send simple invoices and track payments, so you always know who owes you money is much easier to do when it’s all in one place. You can even look at offering online payment options, making it easier for clients to pay you quickly.
Less year-end stress
By keeping records up to date throughout the year you avoid last-minute tax panic and reduce the risk of errors. It means you’ll be able to see your tax liability through the year, and be able to save accordingly, as well as encourage you to make sure you’re claiming for all your legitimate business expenses.
Clearer business insights
Good accounting software helps you see patterns in your income and expenses, so you can make plans effectively for when things might be quieter or it can show you where the best opportunities are.
Don’t ignore Making Tax Digital for Income Tax
If you don’t comply, you will face penalties. HMRC will be enforcing fines for persistent non-compliance, so it’s best to get ahead of the changes now rather than rush when the deadline arrives.
The earlier you switch, the more time you have to get comfortable with digital tools before the rule becomes mandatory.
How we can help
We know that as a self-employed service provider, your time is best spent working with clients, not dealing with tax software. That’s where we come in.
We can support you by:
- Recommending the best Making Tax Digital for Income Tax compatible tools that fit your business style (and doesn’t cost the earth)
- Assisting with quarterly updates so you don’t have to worry about missing deadlines
- Finalising your tax return, making sure everything is correct and submitted on time.
Or, we can do it all for you.
Of course, if you’d prefer to just focus on you and your clients, we can handle everything, from keeping your books up to date to submitting your tax returns. You just focus on the work, and we’ll take care of the admin.
Our partnership with Sage
We’ve partnered with software experts Sage so that we can have both a full range of tools to suit all our clients and stay on top of any developments to the Making Tax Digital rules and regulations in the future.
Our advice? Act now.
Our advice is if you have just submitted a tax return that reported income of more than £30,000 then you should contact us and we can guide you through the options.
Switching to digital record-keeping sooner rather than later will save you time, stress and money in the long run. It will also mean you’re already on the way to being fully compliant with HMRC.
We’ll help you find the best solution for your business and make sure you’re fully prepared for Making Tax Digital for Income Tax.