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Aug 13 2024

Preparing to ‘make tax digital’ for Income Tax

At the time of writing, Making Tax Digital for Income Tax is voluntary. However, this won’t be the case from April 6th 2026, which is when the practice will become mandatory for UK landlords and sole traders. This blog is designed to help you prepare to submit self assessment tax returns in the right way.

What’s the news around Making Tax Digital?

There has been lots of speculation amongst the accountancy community as to whether the 2026 deadline will stand. Although it’s now been confirmed by multiple professional accountancy bodies that this date will go ahead. Once the deadline passes, Making Tax Digital will become mandatory based on your annual income from self-employment or property sources. As a result, sole traders and landlords are among the groups that will be most affected by the changes.

You are able to sign up to Making Tax Digital for Income Tax voluntarily. This is possible if:

  • Your personal details are up-to-date and held by HMRC.
  • You’re a UK resident with a National Insurance number.
  • You’ve submitted at least one Self Assessment tax return.
  • Your accounting period runs from April 6th to April 5th.
  • You don’t have any outstanding tax liabilities.

For a complete overview of the regulations from income tax professionals, see our other blog, ‘Everything you need to know about Making Tax Digital’.

Making Tax Digital for Income Tax

If you’re a sole trader or landlord, the changes will bring in a new way of reporting income and expenses. Once the deadline passes, you’ll gradually be required to:

  • Keep digital records of business income and expenses.
  • Send quarterly updates to HMRC.
  • Submit a tax return and pay any tax owed by January 31st the following year.
  • Use the appropriate Making Tax Digital software.

While these requirements are nothing out of the ordinary for those who are familiar with the basics of management accounts, a qualified Chartered Accountant can provide tailored support. This can be especially valuable in helping to improve the efficiency of your business’s financial processes, such as the use of software for automation. We use Xero Accounting Software to help our clients with bookkeeping and submissions, which is also the standard for cloud-based accounting.

Although it should be noted that whether or not a taxpayer will need to be registered for MTD for ITSA from April 2026 will be based upon the level of their ‘qualifying income’ for the 2024/25 tax year. The threshold for compliance is £50,000. If the individual commences a sole trader and/or rental business in 2024/25, HMRC will annualise those gross figures to see if the £50,000 threshold has been breached. See the full government guidance on signing up for Making Tax Digital for Income Tax.

 

Reliable Chartered Accountants for tax returns

At Jan McDermott Chartered Accountants, we don’t just act as an accountant for limited company purposes, our team is experienced in supporting a range of individuals. This includes, sole traders, landlords, High Net Worth Individuals, and more. We understand that staying updated on tax changes can be draining, both for you and the business. Let us handle it. Get in touch for an introductory chat.