From April 2026, a big change is coming for sole traders and landlords earning over £50,000. Instead of filing a single annual tax return, you’ll need to keep digital records and submit quarterly updates to HMRC as part of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA).
This might sound overwhelming, but it doesn’t have to be! With the right preparation, you can make the transition easy and gain better financial insights along the way. Here’s everything you need to know.
What is Making Tax Digital (MTD) for Income Tax?
Right now, most sole traders and landlords file a Self Assessment tax return once a year. Under MTD, this process will change:
Instead of one big tax return, you’ll need to report your earnings every three months through Xero or another MTD-approved software.
HMRC’s goal is to make tax reporting more efficient, accurate, and up to date—but this means adjusting to a new system. We’re here to help with that.
Who Needs to Sign Up for MTD?
- From April 2026, if your total income from self-employment and/or rental properties is £50,000 or more, you must sign up.
- From April 2027, this requirement will extend to those earning £30,000 or more.
- From April 2028, this requirement will extend to those earning £20,000 or more.
- If you earn below £20,000, MTD doesn’t apply yet, but it may in the future.
Important: The thresholds include all self-employment and rental income before expenses—so check your total earnings carefully!
How Will MTD Work?
Instead of a single annual tax return, MTD requires more frequent updates. Here’s how it works:
- Keep digital records – No more paper receipts! You’ll need to track income and expenses using Xero or another MTD-compliant software.
- Submit updates every three months – Your income and expenses must be reported quarterly to HMRC.
- End-of-year submission – After the fourth quarter, you’ll confirm your figures and submit any final adjustments.
Key Dates:
- First quarterly update due by July 2026 (covering April–June 2026).
- Final end-of-year submission for 2026/27 due by January 2028.
What You Need to Do Now
Even though MTD doesn’t start until April 2026, getting ready sooner rather than later will make the transition easier. Here’s how you can prepare:
1. Check if MTD applies to you
If your total income from self-employment and/or rental properties is over £50,000, you’ll need to sign up for MTD from April 2026. If it’s over £30,000, you’ll join in April 2027, and as you can imagine, if it's over £20,000, you'll join in April 2028. If you’re already a client of ours, we’ll be in touch to discuss this directly with you.
2. Start using digital bookkeeping (Xero is best!)
HMRC requires MTD-compliant software and Xero is our recommended solution because it:
- Automatically tracks income & expenses by connecting to your bank
- Calculates tax liabilities in real time so there are no surprises
- Submits reports directly to HMRC in just a few clicks
We can set up Xero for you and ensure you’re fully MTD-compliant!
3. Prepare for quarterly tax updates
Instead of a last-minute scramble to submit one tax return per year, you’ll need to stay on top of your numbers all year round. If this sounds like extra work, we can handle your bookkeeping and tax filings for you.
What About Tax Payments? Will I Pay More Often?
No! MTD changes when you report your tax, not when you pay it.
- You will still pay your tax bill once per year, just like now:
- 31st January (or also 31st July if you make payments on account).
- Quarterly updates are just for reporting, not for paying tax.
Will this change in the future? HMRC has considered more frequent tax payments, but nothing has been confirmed yet. If it happens, we’ll keep you updated!
Why Signing Up Early Will Save You Money
The last thing you want is a last-minute rush when MTD becomes mandatory. That’s why we’re offering a special early sign-up deal to make your transition smoother and more cost-effective!
Sign up for MTD with us before 30 September 2025, and you’ll get:
- FREE MTD filings for 12 months (the entire 2026/27 tax year!)
- A stress-free transition—no scrambling to meet deadlines!
- Lower alignment fees if you sign up early—helping with cash flow.
How does it work?
- We won’t charge for MTD filings until April 2026, as there’s no requirement to file before then.
- If you sign up before 30 September 2025 and start using our bookkeeping service, you’ll get FREE MTD filings until April 2027.
- For all other clients, MTD filing fees (£15 per month) will begin from April 2026.
- Bookkeeping and software fees will apply immediately upon signing up. If you join in September 2025, for example, bookkeeping will start from October 2025.
- Fixed monthly fees will apply for all services, ensuring predictable costs and no surprise bills.
- Early sign-ups benefit from a lower alignment fee (to catch up bookkeeping records from April 2025 to the month you sign up), making it easier on cash flow.
Signing up early helps you spread costs, stay compliant, and get fully prepared for MTD—without the last-minute panic.
Want to lock in this deal? Contact us today!
How We Can Help You Get MTD-Ready
At Donaldson Ross & Co, we’re here to make tax simple with:
- Xero Setup & Training – Xero can improve your business processes – use it to raise your own invoices and track who owes you money for example.
- Quarterly Tax Filings – We handle your submissions so you stay compliant.
- Bookkeeping & Tax Support – We'll do as much as possible for you to keep your life simple.
- Real-Time Financial Insights – Always know where you stand financially.
Next Steps: Let’s Make This Easy for You
Want expert help getting MTD-ready?
Sign up before 30 September 2025 to claim your FREE MTD filings for 2026/27!
Email us: taxman@donaldsonross.co.uk
Call us: 01425 480814
Visit us online: www.donaldsonross.co.uk