MTD for sole traders, self-employed, landlords

Making Tax Making Tax Digital (MTD) is a new way of reporting income and expenses to HM Revenue & Customs (HMRC). It aims to make tax reporting more efficient and accurate, replacing traditional paper-based methods with digital software. If you're a sole trader or landlord with income from self-employment or property, you may be impacted by this change.

What is MTD for Income Tax?

MTD requires you to report your income and expenses using special software, instead of submitting paper Self Assessment tax returns. This digital system will help reduce errors, speed up processing, and make your tax reporting simpler and more streamlined.

When Will MTD Start?

While MTD for Income Tax won’t be mandatory until 6 April 2026, you can voluntarily sign up as early as the 2024-2025 tax year. If your combined income from self-employment and property exceeds £30,000, you can start using MTD early. If your income exceeds £50,000 in the 2024-2025 tax year, it will become mandatory for you to use MTD starting from April 2026.

HMRC will send you a letter by April 2025 if you're affected, so be sure to look out for that communication.

How Does MTD Affect Me?

If you're a sole trader or landlord and your income from self-employment and property exceeds £30,000, you will be able to sign up for MTD voluntarily from 2024-2025. If your income exceeds £50,000, you will be required to use MTD starting from April 2026.

This means you will need to use digital software to report your income and expenses. If you're unsure whether you're affected or when you need to sign up, it's always a good idea to ask your accountant for guidance.

Are There Any Exemptions?

Some taxpayers may be exempt from MTD, such as those who find it unreasonable or impractical to use digital software. If you're unsure whether you qualify for an exemption, it's important to check with HMRC or speak to a professional.

What Should You Do Now?

If you think you may be affected by MTD, start preparing early. While the system becomes mandatory in 2026, you can voluntarily sign up starting in the 2024-2025 tax year. Signing up early will give you time to familiarize yourself with the digital system and ensure you’re ready when it becomes mandatory.

If you’re unsure whether you need to sign up for MTD or if it applies to you, always feel free to ask your accountant or a tax professional for help.

Conclusion

MTD for Income Tax is an important change, and it’s crucial to start planning now if you think you will be impacted. Sign up voluntarily early if you can, and make sure to stay informed about the changes. With the right preparation, you can avoid any surprises when the new system becomes mandatory in 2026.Digital (MTD) is a new way of reporting income and expenses to HM Revenue & Customs (HMRC). It is set to change how you manage your taxes if you're a sole trader or landlord with significant income. If your total income from self-employment and property exceeds £50,000, you will be required to use MTD for Income Tax starting from April 2026.

What is MTD for Income Tax?

MTD requires you to submit your income and expense details using special software instead of traditional paper-based methods. This digital system aims to make tax reporting more efficient and accurate, reducing errors and speeding up processing times for HMRC.

When will this happen?

The MTD for Income Tax system will become mandatory from 6 April 2026 for taxpayers whose combined income from self-employment and property exceeds £50,000 in the 2024 to 2025 tax year. This will apply to your 2025 to 2026 Self Assessment tax return and beyond. HMRC will send you a letter by April 2025 to let you know if you’re affected by this change.

How does MTD affect me?

If your total income from self-employment or property is over £50,000, you will need to use MTD for Income Tax from April 2026. This means you will have to start using digital software to report your income, expenses, and other relevant details.

Are there any exemptions?

Not everyone will need to use MTD. If your income from self-employment and property is £50,000 or less, you won't need to use MTD, unless future rules change. Some taxpayers may also be exempt from MTD if they meet certain criteria, such as if it is unreasonable for them to use the required digital software.

What should you do now?

If you think you may be affected by MTD, it’s a good idea to start preparing early. You don’t have to wait until 2026. You can begin signing up voluntarily before it becomes mandatory. This will give you time to get familiar with the new system and the software you will need to use.

If you’re unsure about how MTD will affect you, keep an eye out for official correspondence from HMRC and speak to a tax professional who can guide you through the process.

In conclusion, MTD for Income Tax is a significant change that could impact how you handle your taxes. Start planning now to avoid any surprises when the new system becomes mandatory in 2026.

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