Making Tax Digital for Income Tax

The UK government’s Making Tax Digital for Income Tax (MTD for ITSA) initiative is transforming how sole traders and landlords manage their tax affairs.

Starting in April 2026, those with a qualifying income over £50,000 will be required to keep digital records and submit quarterly updates to HM Revenue & Customs (HMRC) using compatible software. From April 2027, the threshold lowers to those with a qualifying income over £30,000 and then again to £20,000 from April 2028.

To ensure you’re informed about what to expect and how this might affect you, we’ve put together a practical guide on Making Tax Digital for Income Tax.

What does MTD for Income Tax Self-Assessment (ITSA) involve?

Under MTD for ITSA, you’ll be required to:

• Maintain digital records: use MTD-compatible software to record income and expenses
• Submit quarterly updates: provide summaries of your income and expenses to HMRC
• File an end-of-year declaration: submit a final tax return by 31 January following the end of the tax year

What’s the point of MTD for Income Tax?

While the transition may seem daunting, MTD for ITSA does provide several advantages:

• Reduced errors: digital records help minimise mistakes
• Time savings: streamlined processes save time during tax season
• Better financial planning: quarterly updates provide a clearer picture of your finances
• Tailored HMRC services: digitalisation enables more personalised support from HMRC

If you’d like help switching to online accounting

At PKB, we’re proud advocates of Sage and Xero Online Accounting systems. They have helped many of our clients to create accurate, real-time accounting records.

If you’d like help moving over to Sage, Xero or any of the other online accounting software that we support, or you simply need help upgrading your existing software, contact us for more information about how we can help make the transition seamless.

We have also put together a helpful step-by-step guide detailing everything you need to know about getting your business ready for MTD for ITSA.

What if you don’t want to use online accounting software?

If you’re a small business looking to avoid the complexities of online software, we are here to assist you.  We can provide you with an easy-to-use spreadsheet for you to fill out, which we will then transform using our specialised software.  This ensures your submissions we provide to HMRC for you are accurate and compliant.

Step one: determine if MTD for ITSA applies to your business

 If you’re a sole trader or landlord registered for Self-Assessment, and you have a gross income from self-employment or property over £20,000, you’ll need to use MTD for ITSA by April 2028.

This includes income from multiple sources like trading and rental properties. However, income from employment, dividends or partnerships isn’t counted towards this threshold.

Please head to the gov.uk website for further guidance on finding out if and when you need to use Making Tax Digital for Income Tax.

Step two: upgrade to compatible software

Find out about the software options from different providers available for Making Tax Digital for Income Tax and how to choose the right software for your needs. Remember to connect your existing HMRC online services account to your chosen software.

You can find software that works with MTD for ITSA on the gov.uk website.

Don’t forget, if you’re a small business looking to avoid the complexities of online software, we are here to assist you.  We can provide you with an easy-to-use spreadsheet for you to fill out.

PKB can take the hassle out of switching software by doing it for you. Simply get in touch and ask about our online accounting options.

Step three: sign up for MTD for ITSA

 You can find out everything you need to know about signing up for MTD for ITSA on the gov.uk website.

Step four: use Making Tax Digital for Income Tax Self-Assessment

It’s not too early to sign up for MTD. HMRC is encouraging eligible taxpayers to sign up for a testing programme to help get ahead of changes. From creating and storing digital records, sending quarterly updates and what to do if your circumstances changes, you can find everything you need to know about using MTD for ITSA on the gov.uk website.

Step five: relax! We can help

PKB can ensure your transition to MTD is smooth and stress-free:

• If your sole trader or rental income is above £50,000, you will need to provide quarterly income tax updates to HMRC from April 2026. As a tax advisor, we have the right software to manage this for you.
• If you would like us to handle your quarterly updates to HMRC, please get in touch and we will proceed with signing you up for Making Tax Digital for Income Tax.
• If you’re concerned about or need help with any aspect of Making Tax Digital for Income Tax Self Assessment, please don’t hesitate to get in touch with PKB.We can help you get set up, ensure you’re compliant with HMRC’s regulations or simply provide further information.