The Making Tax Digital Initiative (MTD), first proposed with ambition in 2015, is now set to be a present reality for landlords and for those who are self-employed. If you are in either category, and have an income above £50,000, you will need to know about this initiative which takes effect from April 2026. This article takes you through where MTD has come from, where it is going, and what these changes may mean for you – particularly if you’ve never had to think about digital records or quarterly updates before.  

Where it has come from 

In 2015, HMRC set out to become ‘one of the most digitally advanced tax administrations in the world’, aiming to replace the traditional once-a-year tax return with a system of real-time digital reporting. Most OECD countries offer digital portals for tax, but few require continuous submissions.  

The first major step was in 2019 when VAT-registered businesses earning over £85,000 had to begin submitting returns using MTD-compliant software. Despite initial scepticism, this is now the standard. In 2022, this was extended to all VAT-registered businesses, regardless of income.  

Whereas MTD for Income Tax Self-Assessment (ITSA) has been on the roadmap for years, repeated delays – some due to Covid-19 and others due to technical and administrative hurdles – have pushed it back. Now, with systems tested and pilot programs expanding, HMRC has set firm deadlines: 

• April 2026: MTD IT starts for sole traders and landlords earning over £50,000  

• April 2027: Threshold drops to £30,000 

• April 2028: Threshold drops to £20,000 

What will change 

Under MTD ITSA, you will no longer just file one self-assessment tax return each year. Instead, you will:  

• Keep digital records using HMRC-approved software

• Submit quarterly updates of your income and expenses

• Send a final declaration (End of Period Statement) at the end of the tax year.

This shift is not just administrative; it will transform how you engage with your finances throughout the year. 

What you will need to do

If you’re in the target group (sole traders or landlords with income over £50k), now is the time to start preparing:  

• Adopt compatible software: You’ll need software that links directly to HMRC

• Organise your records: Receipts, invoices, and expenses must be logged digitally

• Understand quarterly obligations: You’ll submit updates in July, October, January, and April

If you work with an accountant, they’ll guide you through the transition—but the responsibility ultimately sits with you to be compliant. 

The bigger picture 

What is driving these changes? From HMRC’s perspective, MTD is not just about technology, it is about tackling tax errors and reducing the ‘tax gap’ (the difference between what’s owed and what’s collected). Digital record-keeping and frequent submissions reduce the likelihood of mistakes and late payments. MTD is part of a bigger picture where government services – from benefits to pensions – are increasingly digital, real-time, and interconnected.  

Real-Time Information = Real-Time Control  

While MTD will take some adjustment, the long-term benefits shouldn’t be overlooked. If you’ve ever filed your Self-Assessment and been shocked by your tax bill, this new system could be a game-changer.  

Here’s why:  

• No more year-end surprises: With quarterly updates, you’ll have a much clearer idea of your tax position throughout the year 

• Better financial visibility: Digital records help you track income, expenses, and profits month by month 

• Easier to plan and budget: Knowing what you owe means fewer nasty surprises and better cash flow management 

• Stronger business decisions: Real-time insights help you decide when to invest, when to save, and when to pivot 

For landlords juggling multiple properties, or sole traders managing invoices and outgoings, this level of clarity can be incredibly empowering. 

What next?  

MTD for Income Tax is a significant change, but it’s not a tax increase. It’s a shift in how you report, not how much you pay. And while the transition might feel daunting, the potential for better control, fewer errors, and more financial confidence is real. 

Between now and April 2026, HMRC will continue piloting the system, improving software guidance, and refining support tools. Don’t wait until the deadline. Starting early means you can get used to digital record-keeping while there’s still time to fix any bumps in the road.   

The bottom line? MTD is coming, whether you’re ready or not. But if you embrace the digital shift now, you could find that it not only keeps you compliant with HMRC but actually makes your business life easier.  

 Need help? Speak to us now – we can make this work smoothly, painlessly, and for your long-term benefit.