Sole traders and landlords need to act now to prepare for Making Tax Digital for Income Tax
The government has confirmed its commitment to delivering Making Tax Digital for Income Tax (MTD for IT).
From April 2026 onwards, sole traders and landlords who meet the income threshold (see criteria below) will have to:
- keep digital accounting records using MTD compatible software;
- provide updates to HMRC every quarter;
- make a year-end submission (equivalent to the relevant pages on the current tax return).
What are the key dates and who’s in scope?
- April 2026: landlords and sole traders with trading and/or property income over £50k in the tax year ending 5 April 2025 will be in scope.
- April 2027: landlords and sole traders with trading and/or property income over £30k in the tax year ending 5 April 2026 will be in scope.
The government has also confirmed that sole traders and landlords with income over £20k will be in scope at some point in the future, but no date has been announced for this yet.
Note: the thresholds are based on income and not profit. If you have multiple relevant sources of income (such as a trade and a rental property) then it is the combined income that must be considered. You do not, though, combine income sources when it comes to actually keeping digital records and making quarterly submissions: each needs to be recorded and reported separately.
HMRC have indicated that they will be writing to any tax payers they think will be in scope based on the 2023/24 tax return.
WHAT YOU NEED TO DO NEXT
- Not yet in scope: If you’re not in scope for the April 2026 or April 2027 phases of MTD for IT then you don’t need to take any further action at this point.
- In scope and already using compatible digital accounting software: If you meet the criteria above and you’re already using compatible digital accounting software then you don’t need to take any further action at this stage – we’ll provide further updates nearer the time about how you’ll need to submit reports to HMRC.
- In scope and keeping records manually or on Excel spreadsheets: If you meet the criteria above and you’re keeping manual records or using Excel spreadsheets then we recommend that you start using a compatible digital accounting software package in advance of the changes coming in. It’s always best to do this at the start of your financial year to make the transition easier.
The good news is that there are real benefits to using accounting software, not only can it save you time by automating regular tasks, but you’ll also be able to easily generate up-to-date financial reports giving you key insights into your finances.
Moore can help you find the right software solution for you, and provide training to help you get the most out of your accounting package.
Not sure if your software is compatible?
You can find a list of MTD for IT compatible software
here. It is likely that this list will expand over the next 12 months as software providers update their systems to meet the new regulations.
For further advice on digital accounting software or on any aspect of Making Tax Digital for Income Tax, please contact
your local Moore adviser.