The world of tax is changing, and Making Tax Digital (MTD) is at the forefront.
From April 2026, all sole traders and landlords earning over £50,000 will need to make quarterly updates to HMRC instead of filing a single annual return.
It sounds overwhelming, but with the right preparation, you can make the transition easy and even gain valuable insights into your business finances.
Here’s everything you need to know.
What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is part of the strategy to modernise tax reporting. For sole traders and landlords, it means moving from an annual tax return to quarterly updates through MTD-compliant software, like Xero.
Who Needs to Sign Up for MTD?
- April 2026: If your income from self-employment or rental properties is over £50,000, you’ll need to sign up for MTD.
- April 2027: The threshold drops to £30,000.
- April 2028: The threshold drops again to £20,000.
- If your income is below £20,000, MTD doesn’t apply to you yet, but it may in the future.
Note: The thresholds apply to your total income before expenses.
How MTD Works for You
- Keep Digital Records:
You’ll need to use MTD-compliant software like Xero to record your income and expenses. - Submit Quarterly Updates:
Instead of filing one tax return at the end of the year, you’ll report your earnings every three months to HMRC. - End-of-Year Adjustments:
After the fourth quarter, you’ll confirm your figures and submit any final adjustments for the year.
Key Dates You Need to Know
- First Quarterly Update Due: July 2026 (covering April–June 2026).
- Final Submission: January 2028 (for 2026/27).
How to Prepare for MTD
Check If MTD Applies to You:
If you earn over £50,000, you’ll need to sign up by April 2026. Review your total income to determine when you’ll be affected.
Get Ready with Digital Bookkeeping (We Recommend Xero):
Xero is the best solution for MTD because it:
- Automatically tracks your income and expenses by connecting to your bank.
- Calculates tax liabilities in real time.
- Submits reports directly to HMRC. We can help you set up Xero and get you fully MTD-compliant!
We can help you set up Xero and get you fully MTD-compliant!
Prepare for Quarterly Tax Updates:
You’ll need to stay on top of your numbers all year round. If this sounds like extra work, we’re here to handle it for you!
What About Tax Payments?
MTD changes when you report your taxes, but you’ll still pay your taxes once a year (31st January, or 31st July if you make payments on account).
Don’t Wait Until the Last Minute!
Contact Brush Up Accounting today and get your business ready for Making Tax Digital. We’ll make sure your transition is smooth and stress-free. Get in touch now!
