Making Tax Digital for Income Tax

A Practical Guide for Sole Traders and Landlords

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.

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.

These changes aim to reduce errors, save time and provide a clearer picture of your tax obligations throughout the year.

Why is HMRC introducing MTD for ITSA?

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

How do I know if Making Tax Digital affects me?

 If you’re a sole trader or landlord registered for Self Assessment, and you have a gross income from self-employment or property over £30,000, you’ll need to use MTD for ITSA.

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

When will this come into effect?

• April 2026: MTD for Income Tax Self Assessment (ITSA) begins for sole traders and landlords with qualifying income over £50,000
• April 2027: The threshold lowers to £30,000

How can I prepare for the change?

To ensure a smooth transition to MTD, we highly recommend implementing the following steps:

• Assess your income: determine if your combined income from self-employment and property exceeds the £30,000 threshold
• Choose compatible software: select MTD-compliant software to manage your records and submissions
• Stay informed: keep up to date with HMRC’s guidelines and updates
• HMRC is also encouraging eligible taxpayers to sign up for a testing programme to get ahead of the changes.

Contact us

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.

If you’re a PKB client and will be affected by the changes, we will be in touch soon with clear advice on what action is required.

At PKB, we’re so much more than just accountants. We’re Chartered Certified Accountants, registered and regulated by ACCA, one of the world’s most reputable accounting bodies. This accreditation reflects our commitment to the highest standards of professionalism and expertise, so you can feel confident placing your trust in our guidance as these changes unfold.