For many UK sole traders and landlords, April 2026 marked a significant change in how they deal with HMRC. Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is now live for the first group of taxpayers, with more joining in 2027 and 2028.
This article gives a general overview. It is not tax advice — please speak to your accountant about your specific situation. But as a marketing and digital agency working with many UK small businesses, we think it is worth understanding, because it is part of a wider shift towards running businesses digitally.
What is Making Tax Digital for Income Tax?
MTD for Income Tax requires affected sole traders and landlords to:
- Keep digital records of their business income and expenses.
- Use compatible software to send summary updates to HMRC every quarter.
- Submit a final declaration after the end of the tax year, replacing the traditional Self Assessment return for these income sources.
Who does it apply to, and when?
MTD for Income Tax is being phased in based on qualifying income — broadly, gross income from self-employment and property combined:
- From 6 April 2026: qualifying income over £50,000.
- From 6 April 2027: qualifying income over £30,000.
- From 6 April 2028: qualifying income over £20,000.
Thresholds are based on income reported in earlier tax returns, so check with your accountant which year applies to you. There are exemptions in some circumstances, and the government has indicated that other groups, such as partnerships, will follow later.
If you live in Spain but have UK self-employment or rental income, you may also be affected — again, take advice from an accountant familiar with cross-border situations.
What you need to do
- Check whether you are in scope and from when.
- Choose HMRC-recognised software. Many bookkeeping apps support MTD, and some bridging software works with spreadsheets.
- Set up digital record-keeping — ideally connecting your business bank account to your software.
- Plan for quarterly updates. Build the routine into your calendar.
- Talk to your accountant about how they will support you.
Why going digital pays off beyond tax
Making Tax Digital can feel like another administrative burden. But businesses that embrace digital tools often find benefits far beyond compliance:
- Real-time insight. Quarterly updates mean you know how your business is performing throughout the year, not just once a year.
- Better cash flow management. Digital invoicing and bank feeds make it easier to see who owes you money.
- Less admin. Receipt scanning apps, bank rules and automated invoicing can save hours each month.
- Smarter marketing decisions. When your financial data is up to date, you can see which services are most profitable and where to focus marketing spend. Our guide to marketing budgets explains how to use this.
Connecting your systems
The most efficient small businesses connect their tools: website enquiries feeding a CRM, quotes turning into invoices, invoices syncing with accounting software. If you are adopting MTD software anyway, it is a good time to look at your whole workflow. Our guides to choosing a CRM and all-in-one tool consolidation explore this further.
A parallel change in Spain
If you also operate in Spain, the Spanish tax authority is introducing its own invoicing software requirements, known as Verifactu. Read our guide to Verifactu for the timeline.
Need help going digital?
We do not provide tax advice — that is a job for your accountant. But we do help small businesses set up the digital systems, websites and workflows that make running a modern business easier. Get in touch to talk about connecting your tools.
