By Sam Bacall, Director

If you are a sole trader or landlord, you are probably already eying up Making Tax Digital (MTD) and your responsibilities under it.

If you’re not, you probably should be.

The MTD scheme will impact you depending on your qualifying income in the relevant tax year:

• If you earned £50,000 for the 2024/25 tax year, you would need to already be using MTD as of 6 April 2026
• If your income exceeds £30,000 for the 2025/26 tax year, you will need to use it from 6 April 2027
• You would need to use MTD if you earned £20,000 or more in the 2027/28 tax year from 6 April 2028

The thresholds are relatively simple when it comes to MTD and the assumption is that almost everyone (sole traders and landlords) will fall into the scheme at some point soon.

If you would like to learn more about this, we have an easy-to-use guide on the subject which can be found here or read until the end of this article to find out your next steps.

What does MTD mean in practicality?

MTD as a system makes paying your taxes easier in the sense of the actual submission because it will all be digital rather than on paper.

However, it does mean you’ll need to submit four times per year (once per quarter) instead of leaving it all till the end.

You can look at this as either a positive – because it’s forcing you to keep better records – or a negative due to the added compliance work you’ll need to do going forwards.

How to prepare for MTD

If you’re not under MTD yet, ensure your accounting records are up to date and set up a digital system that can connect to HMRC, such as Xero, QuickBooks, or FreeAgent, or get help making your spreadsheets compatible using bridging software.

Next, you’ll need to be diligent about recording everything as it happens, rather than relying on end-of-year catchups.

The quarterly submissions will use your totals to calculate Income Tax and National Insurance, so you need to make sure they’re accurate.

Finally, think about the wider impact on your workflow.

If you have a bookkeeper or accountant, this is the time to discuss how MTD will affect their work and whether you’ll need more support.

Most of us are already prepared for MTD and have begun transferring any clients who aren’t already on cloud accounting platforms. However, planning ahead can save you a lot of stress when deadlines come around.

What happens if you don’t comply?

If you don’t get on board with MTD, you’ll likely be getting penalties from HMRC (although they have stated that they will offer support for those genuinely trying to meet requirements).

Ignoring the rules or leaving it until the last minute could result in fines or additional checks, so it’s better to get ahead.

If you’re unsure whether you fall into the scheme yet, check your income against the thresholds above.

Start by speaking to your accountant about integrating MTD into your regular processes, implementing bridging software or exploring cloud accounting options.

For a full breakdown of what this means for your business or rental income, download our comprehensive guide on Making Tax Digital.

Alternatively, please speak to our experts for help.