Making Tax Digital: Key changes and what you need to know
From 6 April 2026, the way many sole traders and landlords manage and report their tax will change. HMRC is introducing a new initiative, Making Tax Digital (MTD) for Income Tax, that will require eligible individuals to keep digital records and send tax information to HMRC throughout the year, rather than completing on one annual Self Assessment return.
These changes mark one of the biggest modernisations of the UK tax system in decades. In this blog, we've summarised what's changing, who it applies to, and how you can start preparing.
What is Making Tax Digital?
Making Tax Digital is the government's long‑term programme to modernise the tax system by encouraging more accurate and efficient record keeping. By using digital tools, businesses and landlords can reduce mistakes, improve their financial visibility, and avoid any last‑minute rush often associated with annual returns.
With MTD, sole traders and landlords will use digital software to create, store and correct digital records of their self-employment and property income and expenses. Your software will then be used to submit quarterly updates to HMRC and complete your end of year tax return, due by 31 January the following year.
How does Making Tax Digital work?
Under MTD, you must use HMRC recognised software to record all business income and expenses. This can include apps, cloud accounting services, or bridging tools for spreadsheet users. HMRC maintains a list of approved software options, including free tools.
Every three months, you'll send HMRC an update of your income and expenses directly through your chosen software. These updates give HMRC more up‑to‑date information and allow you to see an estimate of your tax bill to plan ahead.
You'll still need to complete an end of year submission by 31 January, confirming your final tax position. The software will pull your quarterly updates into an end-of-year tax summary for you. Here you will check the details are correct and make any further adjustments before submitting your tax return.
Who needs to comply?
The role out of Making Tax Digital will happen in stages:
- from 6 April 2026 - sole traders and landlords with annual income over £50,000
- from 6 April 2027 - those earning £30,000 or more
- from 6 April 2028 - those earning £20,000 or more
If you are unsure which income category you fall into, now is the time to check your latest accounts or speak with an accountant to confirm your start date.
Exemptions and special circumstances
Some individuals may apply for exemption for MTD, for example, if they cannot use digital tools due to age, disability, or limited internet access.
If you believe you may fall into an exempt category, you should check HMRC guidance or seek professional advice.
Getting ready for Making Tax Digital
If your turnover is above £50,000 you'll need to switch to Making Tax Digital from 6 April 2026, choose a recognised software and sign up before your start date so everything is in place when you need it.
You can find more information on Making Tax Digital on the GOV.UK Making Tax Digital website or by visiting the GOV.UK Making Tax Digital for Income Tax webpage.
Prefer to learn in person?
The Invest Stockton-on-Tees team are here help businesses in the Borough understand and prepare for these changes. Join us on the 26 March from 9am for our Business Finance and Making Tax Digital event - a dedicated workshop guiding you through the core financial skills every small business needs, from pricing and forecasting to funding routes and upcoming HMRC requirements.
Spaces are filling up fast so be sure to book your place now!
