Making Tax Digital for Income Tax is here if you are self-employed, a landlord, or have any income outside of PAYE. Now is the time to be thinking about it.

This is not a distant change on the horizon. The first deadline was April 2026, and for many business owners and landlords, the preparation needed to start before that.

In this Business Success Insight we explain exactly what Making Tax Digital for Income Tax is, who needs to comply and when, what it means in practice, and which software options make the transition as straightforward as possible.

Making Tax Digital for Income Tax is one of the biggest changes to self-assessment in years. But most business owners and landlords either do not know it is coming, do not know whether it applies to them, or are not sure what they need to do about it.

What Is Making Tax Digital for Income Tax?

Making Tax Digital, or MTD, is HMRC's programme to modernise the UK tax system. It requires businesses and individuals to keep digital records and submit tax information electronically.

It has applied to VAT for several years. Businesses above the VAT threshold must keep digital records and submit their VAT returns through compatible software.

Making Tax Digital for Income Tax follows the same principle but applies to self-employed individuals and landlords rather than VAT-registered businesses. The formal name was originally MTD for ITSA, Income Tax Self Assessment. HMRC shortened it to MTD for IT.

In practical terms it means quarterly submissions to HMRC summarising your income and expenditure, replacing the single annual self-assessment return that most people are used to.

Who Does It Affect and When?

HMRC is introducing Making Tax Digital for Income Tax in three stages, each with its own income threshold.

From April 2026, anyone with a combined self-employment and rental income of more than £50,000 needs to comply. In April 2027, the threshold drops to £30,000. Finally, from April 2028, it drops again to £20,000.

The income figure that matters is your combined turnover from self-employment and property rental. If you have both, add them together when assessing whether you fall above the threshold.

HMRC will use your previous tax return figures to determine whether you need to register. If your income is approaching any of these thresholds, speak to your accountant before you reach the relevant tax year, not after.

What Does It Mean in Practice?

The practical impact of MTD for Income Tax depends significantly on how you currently manage your bookkeeping.

If you are already using cloud-based accounting software and are VAT-registered, the transition will be relatively straightforward. You are already keeping digital records and submitting to HMRC through software. MTD for Income Tax adds quarterly income tax submissions to that process, but the fundamental way of working does not change significantly.

The bigger change is for people who are still keeping paper records, using spreadsheets, or managing their bookkeeping annually in one go at the end of the year. For those people, the shift to digital record keeping and quarterly reporting represents a genuine change in how they manage their finances day to day.

The key requirement is that records must be kept digitally and a summary of income and expenditure submitted to HMRC every three months. You cannot simply carry on as you are and submit four sets of figures at year end. The records need to be maintained throughout the quarter.

Which Software Options Are Available?

The three software packages Carthy Accountants work with most closely are Xero, QuickBooks, and FreeAgent. All three are MTD-compatible, allow you to do your bookkeeping directly within the software, and support direct submissions to HMRC.

Beyond the compliance requirement, all three produce profit and loss reports, give you a real-time view of your income and expenditure, and allow your accountant to access your records directly. That real-time access is particularly valuable because it means your accountant can flag issues as they arise rather than discovering them months later when reviewing your annual accounts.

HMRC are making some free software available for MTD submissions, but the functionality of free options is likely to be more limited than paid software.

For those currently using Excel or paper records, the transition to one of these packages is worth making sooner rather than later, and not just because of MTD. The business benefits of having accurate, up-to-date financial information available at any point in the year go well beyond compliance.

Helping You Get The Business You Want

Making Tax Digital for Income Tax is not optional and it is not going away. But business owners and landlords who approach it with the right preparation and the right software will find it far less disruptive than it might initially sound.

Start the conversation early. Get the right software in place and build the habit of regular digital record keeping before the deadline arrives. That is how the transition goes smoothly.

If you are approaching any of the thresholds, or if you are not sure whether MTD will apply to you, get in touch. We can look at your specific situation and help you plan the transition with plenty of time to spare.

Get in touch: carthyaccountants.co.uk/contact

No jargon, no pressure, just a clear conversation about what MTD means for you and what to do next.