Making Tax Digital for Income Tax: What It Means for Your Business from April 2026
Making Tax Digital (MTD) for Income Tax Self Assessment is the most significant change to how sole traders and landlords report their income in a generation. It comes into effect from April 2026 — and if you earn over £50,000 from self-employment or property, it affects you directly.
What Is Making Tax Digital for Income Tax?
MTD for Income Tax replaces the annual Self Assessment tax return with quarterly digital submissions to HMRC. Instead of filing once a year, you will submit a summary of your income and expenses every three months using MTD-compatible software. At the end of the tax year, you submit a final declaration to confirm the figures.
Who Is Affected and When?
From April 2026: Sole traders and landlords with combined gross income over £50,000
From April 2027: Sole traders and landlords with combined gross income over £30,000
From April 2028: Sole traders and landlords with combined gross income over £20,000
If you are a limited company, MTD for Corporation Tax is a separate programme — current proposals suggest it will follow in the late 2020s.
What Changes in Practice?
Under MTD for Income Tax, you will need to:
• Keep digital records of all income and expenses throughout the year
• Submit quarterly updates to HMRC using MTD-compatible software (FreeAgent, Xero, QuickBooks, or others)
• Submit a final end-of-year declaration by 31 January, replacing the current Self Assessment return
The deadline for payment does not change — tax is still due by 31 January. What changes is how and how often you report the numbers that calculate it.
What Software Do You Need?
HMRC requires MTD-compatible software. VABK uses FreeAgent and Xero — both are fully MTD-compliant for Income Tax. If you are not already on one of these platforms, now is the time to move. Setting up digital bookkeeping before April 2026 means the transition is a formality, not a scramble.
What Happens If You Don't Comply?
HMRC has indicated that penalties for MTD non-compliance will be introduced. The current penalty system for late filing and late payment will apply to missed quarterly submissions as well as the final declaration. The earlier you put compliant systems in place, the lower your risk.
How VABK Prepares Clients for MTD
Every VABK client is set up on MTD-compatible software from the start of their engagement. For existing clients approaching the April 2026 threshold, we are already reviewing their bookkeeping setup and migrating those who need it. If you are a sole trader or landlord earning over £50,000 and you are not yet on digital bookkeeping, the window to prepare is now.
Book a free consultation to review your MTD readiness.
calendly.com/mariaalla/free-consultation | maria@vabk.co.uk | WhatsApp: +44 07721 407 907