In our previous article we introduced the Government’s Making Tax Digital (MTD) scheme and outlined who it affects, when, and why it’s being phased in. This follow-up focuses on practical preparation. With mandatory start dates beginning in April 2026 and April 2027, now is the ideal time to plan. A considered, steady approach is far preferable to making changes at the last minute.
This checklist is intended to help sole traders, landlords with rental income, and those using the historic self-assessment model, to organise themselves well ahead of the transition. Here’s what you need to do and when.
Before we start – A recap of MTD
Making Tax Digital for Income Tax is a new digital system requiring those with qualifying income to keep digital records of self‑employment, property income, and expenses using an approved software. For those who qualify, this will radically change the long‑standing Self-Assessment model, to give increased visibility and create efficiencies for HMRC.
1. Confirm if and when you need to join MTD
Your start date depends on your qualifying income, defined as your total gross income before expenses or deductions from self-employment and/or property.
If that qualifying income is over £50,000 in the 2024/25 tax year, your MTD start date is 6 April 2026. If you don’t qualify at that point and your qualifying income is over £30,000 in the 2025/26 tax year, your MTD start date is 6 April 2027.
If neither of those start dates apply to you and your qualifying income is over £20,000 in future years, you will be obliged to use MTD at a later date which will be confirmed by HMRC in due course.
If you’re unsure whether your income meets the threshold, check your most recent self-assessment tax return. If you have more than one source of self-employment or rental income, you will need to add the gross income amounts together.
Those who submitted their tax return before August this year and qualify, will shortly be receiving a mandating letter from HMRC regarding their April 2026 start date – confirmation that after a few years of changing goal posts, MTD is finally coming into force.
2. Understand what MTD will require you to do
MTD for Income Tax involves three core obligations:
- Keep digital records of business income and expenses in compatible software.
- Submit quarterly updates to HMRC summarising income and expenditure.
- Make a final year-end submission to confirm figures and finalise your tax position.
This means the familiar once-a-year self-assessment will be replaced with more frequent reporting, although your final annual submission remains the most important for adjustments and reliefs.
3. Decide how to manage your bookkeeping
A key early decision is who will maintain the digital records required under MTD. You may feel comfortable managing your own bookkeeping, and many approved platforms are set up in such a way to make it easy to do so. Or, you may prefer an accountant to take on some or all of the process, or you may decide on a shared approach.
There is no single correct method; the important thing is that the system works smoothly for you.
4. Ensure you have suitable accounting software in place
You will need what HMRC refers to as “functional, compatible software”, meaning it can:
- Maintain digital business records.
- Produce and send quarterly updates directly to HMRC.
- Produce and submit your end-of-year information electronically.
HMRC provides a list of approved Making Tax Digital compatible software, which you can access here. We will be using Xero’s MTD compatible software for our submissions.
If you are currently keeping paper records or using spreadsheets that aren’t digitally linked to HMRC, you will need to update your approach and learn how to use your chosen system. If spreadsheets remain your preference, bridging software may still be an option, provided it meets HMRC’s digital-link requirements. If you’re unsure, we’re happy to review your existing setup and help identify the most suitable solution.
5. Get used to a quarterly reporting rhythm
One of the biggest changes under MTD is not the software, but the pace of reporting; shifting to quarterly submissions instead of annual ones might feel like quite an undertaking at first.
Keeping your records up to date, as you go, throughout the year will make quarterly submissions straightforward and avoid unnecessary stress.
A helpful practice is to:
- Allocate one fixed day each week or month to update records.
- Record expenses and receipts as and when you incur them.
- Review your income and expense categories regularly.
It’s the age-old adage – organisation is absolutely key!
6. Consider joining the voluntary testing programme in 2025/26
For those with gross income over £50,000, sign up is mandatory from 6 April 2026.
For self-aware individuals who reckon they might need time to adjust, joining the testing programme before the mandatory start date can be a gentle way to help yourself adjust. It allows you to familiarise yourself with the quarterly submission cycle with full support available.
This approach can be especially helpful if your income level means you must join in April 2026, or if you simply prefer to avoid deadline pressure. The MTD rules will be mandatory from the point you fall into the regime, and penalties will apply for failing to keep digital records or missing submission deadlines, another reason why early familiarisation can reduce risk later.
Full HMRC guidance on signing up, eligibility and timings are available here.
The move to MTD is significant, but it doesn’t need to be overwhelming. If you plan your approach now, it can make the required compliance nothing more than a new routine, as opposed to a business disruption. If you’d like help reviewing your income position, assessing your current record-keeping setup, or selecting suitable software, we are here to support you. In our role supporting clients, we aim to help each to feel in control and confident, as you move forward in HMRC’s new digital world.
To find out more, get in touch with a member of the Foxley Kingham team at accountants@fkca.co.uk.