How should you prepare for MTD for Income Tax?
Designed to modernise and streamline tax reporting, Making Tax Digital (MTD) for Income Tax marks a major change in how sole traders, the self-employed and landlords manage their tax affairs.
From April 2026, those with qualifying income over £50,000, will be required to:
- Keep digital records
- Use MTD-compatible software
- Submit updates every quarter to HMRC
Preparation is key to a smooth transition to MTD for Income Tax compliance. Below are some key steps to help you prepare:
- Understand if and when you're affected: Confirm whether you meet the income threshold and when you might, familiarise yourself with the requirements and start to plan accordingly.
- Choose compatible software: You will need to use HMRC-approved digital accounting software to submit quarterly updates.
- Digitise your record-keeping: Start maintaining digital records of all income and expenses, including receipts and invoices. We would also advise maintaining a separate business bank account to help ensure that all income and expenses related to your business are clearly distinguished from personal finances.
- Maintain records more regularly: Maintain your financial records on a more regular/routine basis - ideally monthly or quarterly. This approach supports timely decision-making, improves cash flow visibility, and supports meeting your obligations for MTD.
- Send digital records direct: Consider forwarding digital records directly to your adviser monthly (if they are doing so on your behalf) and this will allow them to maintain accurate and up-to-date records on your behalf, ensuring smoother financial management and MTD compliance.
- Seek professional advice: Consult with your trusted business adviser to set up your software and processes to ensure compliance.
- Train yourself and your team: Familiarise yourself with the new digital tools and reporting deadlines.
We’re here to help
We strongly recommend preparing early for Making Tax Digital for Income Tax to ensure your systems and processes are ready well in advance of the compliance deadline. Early action will give you the time and flexibility to make any necessary adjustments and avoid last-minute pressure.
If you'd like to discuss how best to prepare and ensure a smooth transition, get in touch with our team via the form below today.
