Making Tax Digital is now active for the first group of sole traders and landlords. It was made compulsory on 6 April 2026 for individuals with income over £50,000. [GROSS QUALIFYING INCOME]
Current users are required to keep records digitally and file their first quarterly update by 7 August 2026. Other categories are advised to make arrangements for the new less favorable conditions to be imposed in 2027 and 2028.
What Is Making Tax Digital?
The Making Tax Digital for Income Tax (MTD) initiative refers to the UK government’s policy for digital tax record-keeping and filing.
According to MTD for Income Tax, sole traders and landlords are required to keep records digitally, file regular tax returns every quarter, [SUBMIT QUARTERLY UPDATES] and submit their tax returns annually by means of MTD-compliant software.
Quarterly updates are records of income and expenses as opposed to quarterly tax returns.
Who Does Making Tax Digital Apply To?
The MTD ITSA tule is applicable to sole traders and landlords whose total gross earnings from that trade and property is more than the specified limit.
The limits are as follows:
- From 6 April 2026: Gross income over £50,000 as per the tax return for 2024-25
- From 6 April 2027: Gross income over £30,000 as per the tax return for 2025-26
- From 6 April 2028: Gross income over £20,000 as per the tax return for 2026-27
It’s important to keep in mind that qualifying income refers to the business turnover before deducting any expenses, and it has nothing to do with the taxable income.
MTD for Income Tax: What Existing Users Need to Know Now
Maintain Digital Records
All affairs of the business and property must be recorded as transactions are occurring. Apart from the fact that one may keep receipts and invoices, the information must be recorded digitally.
Make Use of Compatible Software
Approved accounting software or bridging software connected to a spreadsheet must be employed. The program to be used must be capable of maintaining the records and providing information to HMRC.
Make Quarterly Updates
Generally, four updates are supposed to be sent back in every tax year. The normal periods for this are:
- 7 August
- 7 November
- 7 February
- 7 May
The first update for Period 6 April 2026 – 05 July 2026 should be submitted by 7th August 2026.
File Your Annual Tax Return
Once the fiscal year is over, go through your data and make the necessary adjustments. End your tax year by filing your tax return with compatible software by the 31st of January after the tax year ends. You will also need to check that all the information that you have given is correct and complete. File your tax returns on time.
How Budget Accountants Can Help
Based in Ashford, Budget Accountants is a team of professional accountants with ACCA certification, providing services exclusively to sole traders and landlords.
Our professional team can help you to examine your income sources, comply with MTD ITSA norms, and file your quarterly income summaries.
Call us now for a free consultation if you want to know more about Making Tax Digital regulations.
FAQ Section
What is Making Tax Digital for Income Tax (MTD ITSA)?
MTD ITSA is the Income Tax version of Making Tax Digital. The qualifying self-employed persons as well as property owners ought to maintain digital records.
Who does Making Tax Digital apply to?
From April 2026, MTD ITSA will apply to self-employed individuals and owners of landed properties that generate a gross qualifying income of over 50,000 GBP. The threshold will be lowered to 30,000 GBP in 2027 and finally to 20,000 GBP in 2028 while partnerships and limited liability companies do not enjoy the privilege to use MTD ITSA.
I’m already using Making Tax Digital — what happens next?
You should continue recording every transaction digitally and perform four quarterly updates in order to avoid any form of delays.
