On 6th April 2026, Making Tax Digital (MTD) for Income Tax Self-Assessment officially commenced. But what does this mean? Well, if you're a sole trader or a landlord with qualifying gross income over £50,000 you will need to use MTD-compatible software for digital record keeping and providing quarterly updates to HMRC. A final declaration will then need to be submitted by 31st January following the tax year. It will be rolled out to those earning qualifying gross income over £30,000 in April 2027, and over £20,000 in April 2028. MTD has already been implemented for VAT-registered businesses.
One question a lot of people ask is why has MTD come into force for sole traders and landlords? Well, HMRC has designed MTD to modernise the UK tax system. As with the current way of the world, technology has developed so it can stay in line with the times. As time has gone on, a lot of companies are reducing paperwork and relying on technology for their bookkeeping and records. There has also been a stronger push for companies to be environmentally friendly and reduce waste. Nowadays, most companies are finding ways to reduce their stationary costs to keep their overheads down and are preferring to only use technology. Doing work manually and/or without the aid of a computer is also prone to errors. This is why MTD has come into play. MTD ensures that these unintentional errors are avoided and can provide HMRC with confidence in the numbers submitted.
Of course shifting to a secure digital platform will reduce errors as records will be digitally recorded and provide real-time reporting. However, there will also be quarterly reporting dates with MTD which sole traders and landlords need to be aware of. Each quarter, the gross income earned over the quarter needs to be reported along with any allowable tax-deductible business expenses and any tax deducted at source if applicable. You must still submit this report even if you have no income or expenses in the quarter. Below shows the quarterly tax periods along with the filing deadline dates.
Of course, you will need to submit an end of year declaration and pay any tax owed by 31 Janauary following the end of the tax year. For example for the 2026/27 year, the tax year will end on 5 April 2027. Your final declaration and any tax due must be submitted and paid by 31 January 2028.
So what MTD compatible software can you use? Well, for one you must definitly use HMRC compatible software that securely connects to HMRC's systems via an Application Programming Interface (API). There are various accounting packages which have this function. Most popular ones include Xero, Sage, Quickbooks, Free Agent and ClearBooks. If you prefer to still use Microsoft Excel or Google Sheets, you can use specialised spreadsheets that have built in coding to securely submit your data to HMRC. You can also use bridging software if you are tracking your records on an old non-compliant system. Popular software includes 123Sheets, Vital Tax and GoSimpleTax. Of course, with all of these options you will need to choose one which suits your budget and business structure. HMRC also offer a HMRC Software Compatibility Tool to help you find one.
At Paradox Accountancy Limited, we can also take this responsibility from yourself and accurately produce and submit quarterly updates along with the final return to HMRC. Feel free to contact us to discuss your MTD requirements.
With nearly 20 years experience in the Finance & Accounting sector, I have founded a practice known as Paradox Accountancy Limited which provides affordable accounting solutions for individuals, sole…
Post articles and opinions on Professionals UK
to attract new clients and referrals. Feature in newsletters.
Join for free today and upload your articles for new contacts to read and enquire further.
