Making Tax Digital for Income Tax has already been introduced for the first group of eligible sole traders and landlords. However, many people earning below the current threshold are not yet required to comply. If this applies to you, the next phase may still affect you from April 2027 or April 2028. The key question is not how to manage every quarterly update now, but when the rules will apply to you and what you can do to prepare in advance.
Making Tax Digital for Income Tax is HMRC’s digital reporting system for eligible sole traders and landlords. If you need a basic overview first, refer to our full blog explaining Making Tax Digital. Detailed information on Making Tax Digital is provided here. – https://budgetaccountants.co.uk/blog/making-tax-digital-what-you-need-to-know-in-2026/
The MTD for Income Tax Rollout Isn’t Finished Yet
The rollout is being introduced in stages according to qualifying income. Those with gross qualifying income above £50,000 in the 2024–25 tax year were brought into MTD for income tax from 6 April 2026 to 5 July 2026. The threshold falls to above £30,000 for the 2025–26 tax year, with the relevant start date being 06/04/2027–05/07/2027 and it should be submitted by 07/08/2027. It then falls to above £20,000 for the 2026–27 tax year, bringing another group into the system from 06/04/2028.
The important point is that eligibility is based on qualifying income rather than taxable profit. Qualifying income generally refers to gross income from self-employment and property before expenses are deducted.
For a more detailed explanation of the rollout and reporting requirements, refer to our blog covering MTD ITSA thresholds and deadlines. You can find comprehensive information about MTD ITSA thresholds. https://budgetaccountants.co.uk/blog/making-tax-digital-guide-for-existing-users/
Why ‘Not Yet Mandated’ Doesn’t Mean ‘Nothing to Do’
If you wait until just a few weeks ahead of your Making Tax Digital start date, you might complicate the process of transitioning. Generally speaking, keeping digital records means keeping records of invoices, receipts, revenues, and expenses, and this can take time to get used to.
You could start a move towards setting up a bookkeeping system compatible with MTD. It allows you to learn how to keep records in a digital manner and create the right habits for your records.
Also, some eligible taxpayers might be allowed to opt in to MTD voluntarily. Nevertheless, voluntary registration requires serious consideration, since after opting in to MTD one has to use software compatible with the system and fulfill the commitments from it.
Thus, it does not mean that preparing in advance is supposed to be registered with MTD. It just means setting up the right bookkeeping software and the proper procedures in order to avoid problems when the time comes for registration.
A Practical Preparation Checklist Before You’re Mandated
- Monitor your income trends: Observe your gross qualifying income from the previous year.
- Set up your accounting software: Opt for an MTD-compatible accounting program before it becomes obligatory for you.
- Develop good digital habits: Keep your invoices, receipts, and transaction records organized during the year.
- Write a plan: If you would like to receive professional help, Budget Accountants will provide you with assistance in preparing the necessary documentation.
Common Mistakes Businesses Make Before They’re Mandated
Looking only at your current income is a common mistake. Eligibility is assessed using qualifying income from the relevant previous self-assessment return, so the tax year being reviewed matters when determining your MTD start date.
Another mistake is leaving software selection and record organization until the deadline is close. Your software may be compatible with Making Tax Digital, but you still need an effective process for keeping your financial information accurate and up to date.
People who receive both self-employment and property income may also underestimate their position by considering each source separately. For Making Tax Digital for Income Tax, qualifying income from these sources may be combined when determining whether the relevant threshold has been exceeded.
Finally, assuming that “it does not apply to me yet” means there is nothing to prepare can create unnecessary pressure later. The next rollout stages are scheduled for April 2027 and April 2028, giving affected sole traders and landlords time to review their position and prepare before the rules apply to them.
Why Prepare Early With Budget Accountants
Budget Accountants is an Ashford-based team of ACCA and AAT-qualified professionals supporting sole traders, landlords, and small businesses. If you are unsure when MTD ITSA will apply to you, the team can review your circumstances and help you prepare your records and compatible software before your mandatory start date.
Schedule a free consultation to understand where you stand on the Making Tax Digital timeline and what steps you may need to take next.
Frequently Asked Questions
Do I need to register for MTD if my income is under £50,000?
Possibly. It depends on your qualifying income and the relevant tax year, as later MTD ITSA phases will bring more sole traders and landlords into the system from April 2027 and April 2028.
What counts towards the MTD ITSA income threshold?
The MTD ITSA income threshold generally considers your gross qualifying income from self-employment and property before expenses are deducted, rather than your taxable profit after costs.
Can I join Making Tax Digital voluntarily before I’m mandated?
Yes, eligible taxpayers may be able to join voluntarily before their mandatory start date. However, joining can create ongoing reporting obligations, so it is worth checking the requirements first.
What happens if my income changes and I cross a threshold?
Qualifying income is assessed using the relevant previous self-assessment return. If your income crosses the applicable threshold, check your MTD – Income Tax start date or speak with an accountant about your position.
