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.