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Mastering Making Tax Digital for Income Tax Your Guide to Stress-Free Tax Reporting

Feb 10, 2025

A significant tax change is coming for 4.2 million self-assessment taxpayers, affecting how you share your income figures with HMRC – yet many people are unprepared for the new rules.

Ready or not, the way we manage taxes in the UK is changing, and Making Tax Digital for Income Tax (MTD for IT) is leading the charge. Designed to simplify tax reporting, MTD for IT is all about going digital—keeping records and submitting updates online. But with new rules rolling out in phases, starting from April 2026, it’s essential to understand what’s required and how to stay ahead.

Whether you’re a sole trader or landlord, this guide will help you navigate the challenges and opportunities of MTD for IT with confidence, so you can spend less time worrying about taxes and more time growing your business.

What is MTD for IT?

MTD for IT is a UK government initiative aimed at helping individuals like sole traders and landlords manage their taxes digitally. The new way of reporting will become mandatory in phases starting from 6 April 2026. Sole traders and landlords earning income from self-employment or property will need to sign up unless:

  • Their qualifying income is £30,000 or less (before expenses or taxes are deducted).
  • They’re exempt from Making Tax Digital for Income Tax. 

Here’s when MTD for IT rules will apply: 

  • Those with a qualifying income of more than £50,000 need to start using MTD for Income Tax from 6 April 2026.
  • Those with a qualifying income of more than £30,000 need to start using MTD for Income Tax from 6 April 2027.

You can also voluntarily sign up to test and help develop the service if you’re eligible. If your income falls below the qualifying threshold, you can still participate in the testing phase.

Learn more about MTD for IT rules at HMRC’s guidance on MTD for Income Tax.

How Does MTD for IT Work?

Here’s how you can comply with Making Tax Digital:

  1. Use compatible software like Xero, QuickBooks, or FreeAgent, to manage income and expenses for self-employment or property income.
  2. Submit quarterly tax updates to HMRC.
  3. File an end-of-year final declaration summarizing your annual income and expenses.

This replaces the annual self-assessment tax form, ensuring more regular tax submissions.

Challenges You May Face

Adjusting to MTD for IT may feel challenging, especially if you’re new to digital tools. Key obstacles include:

  1. Learning New Tools: Adopting new accounting software can take time and effort.
  2. Quarterly Updates: Increased reporting frequency means more regular deadlines.
  3. Added Costs: Digital software subscriptions and potential accountant fees.
  4. Time Management: Juggling more frequent tasks alongside your daily work.

Tips to Make MTD for IT Easy

Follow these tips to simplify MTD for IT compliance:

  1. Choose the Right Software: Use HMRC-approved tools like Xero or Free Agent.
  2. Seek Expert Advice: Engaging a tax accountant can streamline the transition to MTD for IT.
  3. Stay Organized: Keep financial records updated regularly to avoid last-minute stress.
  4. Plan for Expenses: Budget for software costs and professional help if needed.

Need Help?

At RMC Accountants, we simplify taxes for sole traders and landlords. From choosing software to quarterly submissions, we’re here to make MTD for Income Tax stress-free. Contact us today for tailored support.

Disclaimer: This guide is for general information only and does not constitute legal, financial, or tax advice. Always consult a qualified tax expert for advice specific to your situation.