Making Tax Digital: Key Changes from April 2026

From April 2026, HMRC is rolling out Making Tax Digital (MTD) for Income Tax, which will impact many self-employed individuals and landlords. If you earn over £50,000 from employment or property, you’ll likely be affected—so it’s time to start preparing.

What’s Changing?

  • Quarterly Reporting: Instead of filing one tax return a year, you’ll need to submit income and expenses every quarter.
  • Threshold: The £50k combined income threshold applies from April 2026. HMRC will look at your 2024-25 tax return to decide if you’re in.
  • Further Changes: In April 2027, the threshold drops to £30k.
  • Excluded Income: PAYE, dividends, interest, and partnership income won’t count toward the threshold.
  • VAT-Registered? You’ll need to submit two sets of quarterly reports—one for VAT and one for MTD.

What You’ll Need to Do

  • Keep Digital Records: Your records must be stored digitally and submitted using HMRC-approved software.
  • Watch for HMRC Notices: Notifications to affected individuals will begin in April 2025.
  • First Submission: The first quarterly update is due by 7 August 2026.

How to Prepare

  • Start Early: Join HMRC’s pilot scheme in 2026 to get used to the system.
  • Choose Compatible Software: Set up MTD-ready software—many are available, including Xero Simple, launching in April 2025 at £7/month (ex. VAT) through accountants.
  • Separate Your Finances: Using a dedicated bank account for business income and expenses will make your life easier.
  • Stay Updated: Sign up for HMRC’s MTD updates here.

Why Act Now?

  • Avoid last-minute stress
  • Get used to the new system early
  • Monitor income thresholds before they impact you

Recommended Software

Recommended Software: Xero Simple

Starting April 2025, Xero Simple will replace Xero Cashbook to support MTD.

Features include:

  • Up to 10 invoices/quotes per month
  • Hubdoc for receipt capture
  • Automatic bank feeds
  • Easy reconciliation & reporting
  • Direct collaboration with us
  • MTD Income Tax support (beta from April 2025)

You can also check other HMRC-approved software options here.

Need help getting started or choosing the right software? Reach out to our team of experts today.

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