[vc_row][vc_column][vc_column_text]Making Tax Digital is moving into its next phase from April 2026, and many individuals will soon need to meet new digital reporting rules. These changes will affect sole traders and anyone with self-employed or property income. With the introduction of quarterly updates and digital record-keeping requirements, this is a significant shift in how tax administration works in the UK. At Alba Financial Accountants Limited, we help clients understand what these changes mean and how to prepare with confidence.
Understanding these updates early gives you the best chance to put the right processes in place. This guide outlines what MTD is, who it affects, the deadlines you need to know, and the actions you can take now to stay ahead.
What is Making Tax Digital
Making Tax Digital is a government initiative designed to modernise the tax system by shifting from manual or paper-based processes to digital tools and reporting. The aim is to reduce errors, improve accuracy and create a more efficient way of managing tax obligations.
For many individuals, this means adopting digital record-keeping software, submitting information more regularly and adapting the way financial data is stored. While the shift may feel challenging, it also offers opportunities to streamline bookkeeping and gain a clearer picture of your income through the year.
What are digital records
Digital records refer to the electronic storage of financial information, such as income, expenses and business transactions. Rather than keeping handwritten notes or paper files, you must maintain accurate and up-to-date information using compatible software. This ensures that data submitted to HMRC is reliable and consistent.
Digital records help reduce mistakes, simplify tax calculations and allow you to manage your finances more efficiently. Many individuals already use digital tools for invoicing or bookkeeping, but under MTD, keeping digital records becomes a formal requirement.
What’s happening and when
HMRC has written to many individuals who are expected to be affected by MTD. The timeline is phased over several years, and understanding where you sit in this structure is essential. Below is a clear breakdown of the upcoming changes.
April 2025: Voluntary start
Sole traders and individuals with self-employed income can choose to begin using MTD-compatible software ahead of the mandatory deadline. This is an opportunity to test new systems, understand digital record-keeping and become familiar with quarterly reporting.
April 2026: Mandatory for income of £50,000 or more
MTD becomes compulsory for those with combined self-employment and property income of at least £50,000 based on their 2024 to 2025 tax return. This is expected to impact hundreds of thousands of individuals across the UK.
April 2027: Threshold reduces to £30,000
A wider group will join the scheme when the income threshold falls to £30,000, based on the 2025 to 2026 tax return.
April 2028: Threshold reduces to £20,000
The final stage of the rollout impacts those with income from £20,000 onwards based on the 2026 to 2027 tax return.
Time-apportioned example for new traders
If you begin trading during the 2024 to 2025 tax year, your income may be time-apportioned to determine whether you meet the threshold. For example, if you operate for six months and generate income exceeding £25,000, you could fall within the 2026 requirement. Those who begin trading after April 2026 will only need to register for MTD once they have filed their first tax return.
How will this affect you
These changes will influence how you manage your financial information. If you have income from property or self-employment, there will be additional steps to complete throughout the year.
Key requirements
Keeping digital records
You must maintain an accurate and complete set of digital records covering all income and allowable expenses. This must be done using approved software that can store data in the correct format.
Quarterly updates
Instead of submitting one annual return, you will need to send summary figures to HMRC every three months. These updates reflect your business income and expenditure for each quarter.
Filing a digital tax return
You will also submit an end-of-year return, bringing the total number of submissions to five per tax year. This allows HMRC to review your finalised figures and confirm your tax position.
Income threshold qualification
Your obligation to follow MTD is based on your combined income from UK and overseas property or self-employment. If this exceeds the relevant threshold for the year in question, you must comply from the corresponding start date.
What do you need to do now
Preparing early is the best way to avoid disruption and ensure a smooth transition.
Understand your income threshold
Review your total income from self-employment and property for the 2024 to 2025 tax year. If it exceeds £50,000, you will fall within the first mandatory stage in April 2026. If not, keep track of your figures over the following years to determine when you will meet the threshold.
Choose the right software
You will need HMRC-approved software that can record transactions, generate quarterly summaries and submit digital returns. The right system should be straightforward to use and capable of growing with your needs. Alba Financial Accountants Limited can help you identify suitable options.
Get expert support
The earlier you seek guidance, the easier the transition will be. Support from experienced advisers can help you set up digital tools, understand your obligations and manage updates with confidence.
How we can help
At Alba Financial Accountants Limited, we work closely with individuals who are preparing for MTD. We provide guidance on eligibility, suitable software, digital processes and ongoing compliance.
We help clients:
Assess whether MTD applies to them
Set up and implement the right software
Understand basic bookkeeping within a digital system
Manage digital records and quarterly updates
Stay fully compliant with HMRC requirements
Our aim is to make the change as smooth as possible while offering practical, long-term support.
Making Tax Digital FAQs
Who needs to sign up
Individuals whose combined self-employment and property income exceeds the HMRC threshold for the relevant year will need to join MTD.
How will I know if I qualify
Your eligibility is based on the total income shown in your tax return. If it meets or exceeds the threshold, you will need to comply from the corresponding date.
Do I need to buy expensive software
There are many options available, including affordable and scalable systems. The right choice depends on your circumstances.
Will this change how I interact with the accountants
You may share information more frequently, but accountants can still manage submissions, support bookkeeping and oversee compliance.
The first deadline is not until next year. Why act now
Starting early allows you to test software, organise digital records and avoid challenges close to the deadline.
How are charities affected
Charities with qualifying income may still need to follow MTD rules depending on their activities.
Are VAT-registered businesses affected
VAT-registered businesses are already required to comply with MTD for VAT, but income thresholds for MTD for ITSA are separate.[/vc_column_text][/vc_column][/vc_row]