Are you a sole trader or do you earn money from property?
There is a new way to keep records and report your income and expenses. It is called Making Tax Digital (MTD) for Income Tax, and it is changing how tax returns are completed.
What is MTD for Income Tax?
It is a UK government initiative that requires self-employed individuals and landlords to keep digital income and expense records and submit quarterly updates to HMRC through approved software.
The aim is to modernise and streamline tax reporting, moving away from annual self-assessment returns to more regular ‘real-time’ updates.
Who is affected?
- Sole traders: Anyone registered for Self Assessment with business or self-employment income.
- Landlords: Those with property rental income, even if not operating a traditional business.
- If you are both a sole trader and a landlord, your combined qualifying income is considered.
Mandatory start dates
The change is being introduced in phases, based on the total gross income (total of sales and/or rental income) per year.
-
Phase 1: Above £50,000
6 April 2026 -
Phase 2: Above £30,000
6 April 2027 -
Phase 3: Above £20,000
6 April 2028
What do you need to do?
Keep digital records of all your income and expenses. This means using compatible software to record your transactions throughout the year, rather than relying on paper records or spreadsheets alone.
You will need to send a summary of your income and expenses to HMRC four times a year using compliant software. At the end of the tax year, you will submit a final declaration, which replaces the annual Self Assessment tax return.
MTD for Income Tax does not increase the amount of tax you pay. However, it does mean you will need to keep your records up to date more regularly and submit information on a quarterly basis.
How we can help
At Studholme-Bell, we are committed to making the transition as simple as possible for our clients.
- Xero partnership: We have partnered with Xero to provide you with easy-to-use, fully compliant software for digital record-keeping and submissions.
- Onboarding and training: Our team will guide you through setting up your digital records, quarterly submissions, and final declaration.
- Personalised support: Whether you are a sole trader, landlord, or both, we offer dedicated assistance to ensure you stay compliant and stress-free.
- Stay ahead: We’ll keep you updated on any changes to MTD rules and deadlines, and help you prepare well in advance.
We encourage our clients to start preparing now. To learn how Xero can streamline your tax process, you can register for the Xero MTD Webinar.
Need help with Making Tax Digital?
Send us a message and we'll get back to you as soon as possible.
