Making Tax Digital (MTD) is on its way! If you are self-employed or a landlord, there are MASSIVE changes you will need to deal with when MTD comes into play in 2026.
Currently. you only usually do one tax return a year for your income tax. From 2026, you may have to tell HM Revenue & Customs about your income much more often.
So when did this mega MTD change happen?
Back in 2015 the then Chancellor, George Osborne, announced “the end of the tax return” in his Budget speech. What he didn’t quite say is that it would be replaced with a requirement to report far more often!
That was almost 10 years ago, and the snappily-titled Making Tax Digital for income tax self-assessment (MTD ITSA) has been delayed for as many years. However, it is definitely coming into force from 6th April 2026.
Who will be affected by Making tax Digital?
Initially it will only affect Sole Traders (the self-employed) and individuals with property income (right now) with TURNOVER over £50,000 a year.
NOTE: TURNOVER. Turnover = sales, rental income, and whatever you get in ‘at the top’. It’s NOT profit, and you can ignore other income like any employment that is taxed at source.
As ever the devil is in the detail, and we don’t have nearly as much (at the time of writing) as we would like. But here goes anyway.
What’s required for Making Tax Digital (For Income Tax)
Quite a lot more than you’re required to submit now! When you are required to become part of Making Tax Digital:
- You will have to keep your records digitally and submit DIGITAL tax returns every quarter. Yes, that’s once every three months.
- You will also have to ‘Finalise Your Tax Position’ once a year. This submission is likely to feel much like a tax return does now. Many of the boxes will be prepopulated with data that HMRC already has. This “finalisation” also adjusts for other tax reliefs, etc, not covered in the quarterly returns.
- The quarterly updates will just send income and expenditure totals (for the year to date). Any missing data can be updated on the next one, as it is a ‘year to date’ figure.
Key Dates for Making Tax Digital
| Quarterly Update Period | Quarter period covered | Submission deadline |
| 1 | 6 April – 5 July | 7 August following quarter end |
| 2 | 6 April – 5 October | 7 November following quarter end |
| 3 | 6 April – 5 January | 7 February following quarter end |
| 4 | 6 April – 5 April | 7 May following quarter end |
As a side note you can also use calendar months, so you could run period 1 for example as 1st April – 30th June, the deadline doesn’t change.
The ‘quarters’ are a year-to-date numbers update, so each quarter will include everything from the start of the tax year.
Doesn’t feel like the end of the tax return does it? :- ) 🤔
When will I have to join the Making Tax Digital scheme?
When you have to start to operate under Making Tax Digital will depend on your turnover in a given tax year.
It could start as early as April 2026. If your turnover for your self-employment AND any rental income combined is over £50,000 on your 24/25 tax return (the one due 31st January 2026) you will be in the scheme from 6th April 2026.
The limits then reduce in ongoing years, so:
- If turnover is £30,000+ in 25/26, you will be in from 6th April 2027
- If turnover is £20,000+ in 26/27, you will be in from 6th April 2028
HMRC effectively judge whether you need to be ‘in’ from the data from your last tax return. As you can see, very few will escape MTD after April 2028. There is a tool on the HMRC website to assist you work this all out.
The bottom line is that once you are in, you are in, aside from a few specific exclusions.
Just to say that at time of writing, there are no timescales on Partnerships coming into the scheme, or limited companies.
When do I need to pay my tax?
You will still pay your tax once a year (or twice if you have a ‘payment on account’ to make as well). There are currently no plans to change this.
Different trades, different submissions
A separate submission is needed for each trade if you have more than one. For example, you do Uber on the side, but work on a building site in the main. You also need to do additional reporting for any property rental income you have, although all properties are reported as one source of income.
How do I submit under the MTD system?
HMRC are Making Tax Digital, not Making Tax Easy!
The real kicker is that there is currently no planned way to directly report through your HMRC account. The HMRC have confirmed they will not be adding this feature.
You will need to use digital software – there is no paper-based option.
This digital option could be a simple spreadsheet, although you will need to have some ‘bridging’ software to effectively suck the data out of the spreadsheet and send to HMRC. The challenge at the time of writing is it’s not known if any spreadsheet bridging software will allow the final submission!
From our own investigations, it’s clear that not all MTD software solutions currently available are created equal. Some are one-way transmission only, for example, whereas some will not only transmit, but receive an estimate of your tax bill.
Yikes! So what providers are out there?
You can see the list of providers here on HMRC’s website. Our favourite is Xero, as their ‘Simple’ plan can get you going. It is also easily upgraded as your business grows and you need more functionality.
You can grab a discounted Xero licence here: heelanassociates.co.uk/xero
Do I need to do all this if I am just starting out?
Right now at time of writing, if you start a business after 6th April 2025 the earliest you will need to be using the scheme would be 6th April 2028. (We won’t go into the technical reasons here!)
However we’d recommend getting going and keeping digital records from day 1, especially as you know it’s very likely you will need to reporting digitally in the coming years. There really is no escaping this one.
BIG caveat – there are still many unknowns
At the time of writing, software providers and experts still don’t know all the details for every situation. (Trust us, they are as frustrated as you on this.) More detail is coming out at frequent intervals, and there is currently a pilot scheme in play for very simple, straightforward affairs.
Never fear, we will bring you the latest info as it develops!
VAT and Making Tax Digital
If you pay VAT, you’ll know that Making Tax Digital is already here for VAT returns. However, the VAT MTD operates a different set of rules and returns than what we are discussing here.
Can I avoid Making Tax Digital?
In short, outside changing your religion or moving to a place with no internet, it’s unlikely.
You could consider moving from self-employed to becoming a limited company (a.k.a. incorporating), or considering a partnership, but you are likely just delaying the inevitable.
On a serious note there are some specific exclusions on HMRC’s website.
As a side note, like anything involving tax reporting, there are penalties for late returns and non-submission…
Can my accountant help?
As you can imagine, there is much concern in the accounting industry and business groups about the impact on small businesses of these major changes.
We’re also concerned about the demands MTD will place on the accounting profession as business owners look for more help. There are still major technical details that are not clear, with less than a year to initial launch. Given the time frame until launch, this is incredibly frustrating for all parties.
However the simple answer will be it’s very likely your accountant will be able to help. Make time to speak to them and find out where they are at regarding MTD.
Grasping the nettle
Like it or not, Making Tax Digital is coming. It’s a challenge we all need to deal with, and it’s coming quick! Keep an eye on our blogs for the latest info, and/or sign up to our newsletter here https://mailchi.mp/e1f0bd926421/heelan-associates-newsletter
I’m still confused about Making Tax Digital
If you don’t have an accountant or feel you night need assistance in the future with Making Tax Digital, we’d love a chat about how we can help.
About the author:
Dan Heelan is the Business Services Director of Heelan Associates, an accounting firm that helps small business owners across the UK start, survive, and grow.
With a background as a small business owner himself, he discovered his passion for accounting and tax early in his journey and now focuses on empowering fellow entrepreneurs with the knowledge and tools to navigate the financial side of running a business.
You can see and hear Dan in action in his regular: