Making Tax Digital for Income Tax (MTD IT) is just weeks away for sole traders and landlords earning over £50,000, marking a significant change in the way earnings are reported.
Who’s affected by MTD IT, and when?
HMRC is rolling out MTD IT in phases, based on qualifying income:
April 2026: Sole traders and landlords with qualifying income above £50,000 for the 2024/25 tax year must join. That’s approximately 864,000 taxpayers in the UK.
April 2027: The threshold drops to £30,000 for the 2025/26 tax year.
April 2028: The threshold drops again to £20,000 for the 2026/27 tax year.
Those who fall into the first phase should already have received a letter from HMRC with a QR code linking to more information.
What is changing with MTD IT?
Under MTD IT, there are three key requirements for reporting earnings:
- Digital record-keeping: Income and expenses must be tracked using digital tools.
- Quarterly updates: Every three months, updates must be submitted to HMRC using MTD compatible software.
- End-of-year return: In addition to quarterly updates, an annual return will still need to be filed through the same software.
With this fundamental shift in how records are maintained, tax reporting moves from an annual event to an ongoing conversation with HMRC, allowing them to see the position of a business in real-time.
What do you need to do?
Those who have received a letter from HMRC, should scan the QR code for guidance or search “Making Tax Digital for Income Tax for sole traders and landlords: step by step” on gov.uk.
Next, affected business owners should ensure that they have appropriate software. MTD compatible software is needed to manage records and quarterly submissions.
Time should be invested into either learning the software, or appointing a trusted professional to handle the record-keeping and submissions.
Quarterly submissions mean that collating information and reporting can’t be left until the annual return deadline anymore. Staying on top of record keeping will become an essential regular task.
Ormerod Rutter can help
At Ormerod Rutter, we understand that this is a significant change for business owners, and can help with:
- Understanding whether MTD IT affects your business and when
- Choosing the right software for your needs
- Setting up systems that work for your business
- Ensuring you’re ready when your deadline arrives
Don’t hesitate to contact us with questions or concerns. Call us today on 01905 777600 or email MTD@ormerodrutter.co.uk
