By KSM Consulting Ltd | Chartered Certified Accountants & Tax Advisors in London
The UK tax system is moving fully online — and Making Tax Digital (MTD) is leading the change. Introduced by HMRC to modernise tax reporting, and that is where making tax digital for landlords and self-employed UK comes into effect. MTD aims to make record-keeping more accurate, reduce errors, and simplify how individuals and businesses manage their tax affairs.
Since 2022, MTD has applied to VAT-registered businesses, and it’s now expanding to Income Tax. With new rules coming into effect from April 2026, it’s important to understand what MTD means, who it affects, and when you’ll need to comply.
Making Tax Digital for UK Income Tax
Making Tax Digital is a UK government programme requiring taxpayers to:
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Keep digital records of income and expenses.
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Use HMRC-approved accounting software (like QuickBooks, Xero, or FreeAgent).
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Submit updates to HMRC electronically instead of through paper returns.
The idea is to make tax simpler, faster, and less prone to mistakes. For most, this will mean using cloud-based software to track business and property income in real time.
MTD for Income Tax: The Next Phase
The next stage, Making Tax Digital for Income Tax Self Assessment (MTD ITSA), begins rolling out in April 2026. It will eventually replace the current Self Assessment process for self-employed individuals and landlords.
If you’re self-employed or earn rental income personally (not through a company), MTD will soon apply to you.
Under MTD for Income Tax, affected taxpayers must:
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Keep digital records of all income and expenses.
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Submit quarterly updates to HMRC for each income source.
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File a final annual declaration to confirm income, adjustments, and tax owed.
KSM Tip: You can already join the MTD pilot scheme to test your software and processes before the 2026 deadline.
When Will MTD for Income Tax Apply?
The rollout will be phased based on your total qualifying income — that is, your combined self-employment and property income before expenses.
| Total Qualifying Income | MTD Start Date |
|---|---|
| Over £50,000 | April 2026 |
| Over £30,000 | April 2027 |
| Over £20,000 | April 2028 |
| Below £20,000 | Continue using Self Assessment for now |
Your eligibility depends on income, not profit.
What Counts as ‘Qualifying Income’?
Your qualifying income determines whether MTD applies to you. It includes:
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Self-employment income (sales before expenses).
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Rental income from personally owned property.
It does not include:
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Wages or salary from employment.
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Dividends or director’s pay from a limited company.
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Rental income earned through a company (incorporated landlords).
Note: Partnerships are not yet included in MTD for Income Tax, though HMRC intends to bring them in at a later stage.
Combining Multiple Income Sources
If you earn from both self-employment and property, HMRC combines these figures to determine your total qualifying income.
Example 1:
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£40,000 self-employment income
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£20,000 rental income
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Total: £60,000 → You’ll join MTD in April 2026.
Example 2:
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£35,000 self-employment income
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£25,000 salary from employment
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Only your self-employment income (£35,000) counts → You’ll join in April 2027.
How HMRC Calculates Your Qualifying Income
HMRC reviews your most recent Self Assessment tax return to determine when you must join MTD:
| MTD Start Date | Tax Year HMRC Reviews | Income Threshold |
|---|---|---|
| April 2026 | 2024/25 return | Over £50,000 |
| April 2027 | 2025/26 return | Over £30,000 |
| April 2028 | 2026/27 return | Over £20,000 |
If your business is new and you haven’t filed a full tax year yet, HMRC will annualise your income — for example, if you earned £15,000 in six months, they’ll project £30,000 as your annual income.
What You’ll Need to Do Under MTD
If you’re required to join MTD for Income Tax, you’ll need to:
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Keep digital accounting records of income and expenses.
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Use MTD-compatible software to submit data to HMRC.
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Send quarterly updates instead of an annual tax return.
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File a final declaration each year confirming all figures are correct.
This means replacing spreadsheets and paper records with recognised accounting software.
KSM Tip: Many landlords and sole traders already use cloud-based tools. If you haven’t started yet, moving early gives you time to learn the system before it becomes mandatory.
Preparing for MTD: What You Can Do Now
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Review Your Income Sources
Identify if your income meets or will soon meet the MTD threshold. -
Choose Approved Software
HMRC publishes a list of MTD-compatible software. Popular options include QuickBooks, Xero, and FreeAgent. -
Keep Digital Records
Get used to recording transactions in real time — invoices, receipts, and expenses — rather than saving them for year-end. -
Seek Professional Support
Partnering with an accountant ensures your system is compliant and efficient from the start.
KSM Consulting’s Expert Guidance
At KSM Consulting Ltd, we help sole traders, landlords, and small businesses prepare for Making Tax Digital with:
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Setup and training on HMRC-approved accounting software.
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Digital record-keeping guidance and compliance checks.
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Ongoing quarterly submission support and tax review.
By preparing early, you’ll avoid disruption — and gain a clearer, more accurate view of your finances all year round.
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📧 Email: info@theksma.co.uk
🌐 Visit: www.theksma.co.uk