If you've heard of Making Tax Digital (MTD) but aren't quite sure what it means, you're not alone. The next phase will affect thousands of landlords and self-employed individuals. With the right preparation, MTD doesn't have to be complicated. It can make managing your finances easier.
What Is Making Tax Digital?
Making Tax Digital is HMRC's plan to modernise the UK tax system by moving away from paper records and annual tax returns. Instead, affected taxpayers will keep digital records, use compatible software and send regular updates to HMRC throughout the year.
Who Will Be Affected?
The changes will apply in stages:
From 6th April 2026 for qualifying income over £50,000.
From 6th April 2027 for qualifying income over £30,000.
From 6th April 2028 for qualifying income over £20,000.
Qualifying income includes your total self-employment and property income before expenses.
What Will Change?
Instead of relying on one annual self-assessment tax return, you'll keep digital records, use HMRC-compatible software, submit quarterly updates and complete a final declaration at the end of the tax year.
What About Landlords?
Landlords will need digital records of rental income, allowable expenses, insurance, repairs, letting agent fees and other relevant costs if they meet the qualifying threshold.
What About Sole Traders?
Keeping records up to date throughout the year will help you understand your business performance, estimate your tax bill, improve cash flow and reduce errors.
Why Digital Records Can Make Life Easier
Digital accounting software can store receipts, connect to your bank account, categorise transactions automatically and provide a real-time view of your finances.
How to Prepare Now
Choose suitable software, keep your bookkeeping up to date, organise your records digitally, review your income and speak to your accountant well before MTD applies to you.
Making Tax Digital Doesn't Have to Be Difficult
With the right systems and support, Making Tax Digital can become part of your normal routine rather than something to worry about.
We're Here to Help
At Hammond-Barr, we'll explain the changes in plain English, recommend suitable software and help you prepare for Making Tax Digital with confidence. If you'd like support getting started, get in touch with our team today.
Want to know more?
You can contact Hammond-Barr accountants on 01438 281281 or via email at [email protected].
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