From April 2026, significant changes are coming to the UK tax system, and if you’re a sole trader or landlord, it’s vital that you understand how these changes will impact you. The government’s Making Tax Digital (MTD) initiative is moving income tax reporting into the digital age, and those who don’t prepare in advance risk penalties, confusion, and unnecessary stress.
In this detailed guide, we’ll break down:
- What MTD for Income Tax Self-Assessment (ITSA) actually means
- Who it applies to and when
- How to get compliant now
- The tools you’ll need to succeed
- How Glow Accounts can help
Let’s dive in.
What is Making Tax Digital?
Making Tax Digital is a UK government initiative from HMRC aimed at making it easier for individuals and businesses to get their tax right and keep on top of their affairs. According to HMRC’s official guidance, the goal is to modernise the tax system, reduce errors, and support better financial planning.
It involves:
- Keeping digital records
- Using MTD-compatible software
- Sending tax updates to HMRC every quarter
Who Does It Apply To and When?
| Annual Income | MTD Compliance Date |
|---|---|
| £50,000+ | April 2026 |
| £30,000+ | April 2027 |
| £20,000+ | To be confirmed |
So, if you’re a sole trader or landlord with:
- Annual business or property income over £50,000, you’ll need to comply from April 2026
- Income over £30,000, you’re next in line from April 2027
- Below £30,000? HMRC hasn’t confirmed your start date yet, but it’s coming.
This replaces the traditional annual Self Assessment tax return with quarterly digital updates and a final declaration.
What Are the Key Changes?
1. Quarterly Updates to HMRC
- Every 3 months, you’ll submit summaries of income and expenses
- This gives HMRC a near real-time view of your finances
2. Final Declaration (Replacing Self Assessment)
- At the end of the tax year, you’ll submit a final statement
- This confirms your total income and the tax owed
3. Digital Record-Keeping
- You’ll need to keep financial records digitally using MTD-compatible software
- Paper or spreadsheets alone won’t be sufficient
Why This Matters: The Risks of Not Preparing
Failing to prepare for MTD could result in:
- Penalties for non-compliance
- Last-minute panic as deadlines approach
- Missed tax-saving opportunities
- Poor cash flow visibility
Transitioning early puts you in control, with time to understand the process and avoid stress later.
What You Need to Do Now
Check Your Income Level
- If your total business or property income is over £50,000, start preparing now.
- If you’re over £30,000, consider getting ahead—2027 will come faster than you think.
Use MTD-Compatible Software
- HMRC maintains an updated list of MTD-compatible software
- Glow Accounts recommends Xero for ease of use and compliance
Understand Quarterly Reporting
- Each quarter, you’ll submit updates via software showing income and expenses
- These are summaries, not full tax returns
Start Keeping Digital Records
- Every invoice, receipt, and expense needs to be stored digitally
- Apps like Hubdoc or Receipt Bank (now Dext) can automate this
Ask for Help Early
Glow Accounts offers setup, training, and ongoing support to keep you compliant and stress-free
What Counts as Digital Record-Keeping?
Digital records must include:
- Dates and amounts of income and expenses
- Categories (e.g., rent, utilities, travel)
- Kept within software that can directly submit to HMRC
Acceptable tools include:
- Xero
- QuickBooks
- FreeAgent
- Sage Business Cloud
FAQs About MTD for Sole Traders
Do I still need an accountant?
Yes. MTD doesn’t replace advice. It changes the method, not the value of expert guidance.
What if I already use spreadsheets?
You’ll need bridging software to make them MTD-compliant—but this is often more hassle than it’s worth long-term.
Will MTD affect how much tax I pay?
No. But it might help you identify efficiencies earlier by tracking income and expenses in real time.
What if I don’t comply in time?
HMRC is likely to issue penalties or late submission fines once MTD becomes mandatory. Better to prepare now than face rushed compliance later.
Final Thoughts
MTD is a big change, but it’s also a chance to modernise how you run your business. The earlier you transition, the smoother it will be, and the more control you’ll gain over your finances.
At Glow Accounts, we’re here to make this transition seamless. Whether you want full support or just some guidance along the way, we’re ready.
How Glow Accounts Can Help Your Business Thrive Without Risking Personal Finances
We’re already helping clients get MTD-ready and avoid future stress. Here’s how:
- Xero Setup and Training
- Full software setup and walkthroughs so you can hit the ground running
- Digital Record Coaching
- We’ll show you how to store receipts, tag expenses, and meet requirements
- Quarterly Review and Submission Support
- Need help with your updates? We’ve got you covered
- Final Declaration Check
- We’ll ensure your final annual submission is accurate, compliant, and tax-efficient
