Making Tax Digital for Income Tax: What Self-Employed Businesses and Landlords Need to Know Before April 2026
Major changes are coming to how self-employed individuals and landlords report their income to HMRC.
From April 2026, Making Tax Digital for Income Tax Self Assessment will begin to apply to many people across the UK. The changes are designed to give HMRC more regular visibility of income and to move tax reporting away from the traditional once-a-year system.
If you are self-employed or earn income from property, it is important to understand how this will affect you and what steps you can take now to prepare.
Who Will Be Affected
From April 2026, Making Tax Digital for Income Tax will apply to individuals who earn £50,000 or more per year from self-employment or property income.
If you fall within this threshold, you will need to follow the new digital reporting requirements.
The threshold will reduce further from April 2027, when the rules will extend to those earning £30,000 or more from these sources.
This means a much larger number of business owners and landlords will be affected in the coming years.
What Will Change
The biggest difference under Making Tax Digital is how often information must be reported to HMRC.
Instead of filing one Self Assessment return per year, affected individuals will need to:
Keep digital records of income and expenses
Use MTD compatible accounting software
Submit quarterly updates to HMRC
File a final year end declaration
This could result in up to five submissions per year rather than a single annual return.
The goal is to move towards a more real-time reporting system rather than the traditional end-of-year process.
The End of the Once-a-Year Approach
For many people, tax has historically been something that is dealt with once a year, often just before the Self Assessment deadline in January.
Making Tax Digital will change this approach.
The days of relying on spreadsheets saved on your computer or sorting your records at the last minute are coming to an end. HMRC will expect more regular updates and better organised financial records throughout the year.
Businesses that already keep their bookkeeping up to date will find the transition far easier than those who rely on a year-end catch-up.
How You Can Prepare Now
Although the rules do not start until April 2026, preparing early can make a big difference.
Some practical steps include:
Moving onto cloud accounting software
Separating business and personal bank accounts
Getting into the habit of monthly bookkeeping
Reviewing your income and profit levels
Building these habits now will make the transition much smoother when the rules come into force.
Is It Time to Review Your Business Structure
For those consistently earning £50,000 or more, the introduction of Making Tax Digital may also be a good time to review whether remaining a sole trader is still the best option.
In some cases, switching to a limited company can provide benefits such as:
Potential tax efficiencies
Clearer separation between personal and business finances
Reduced personal liability
More structured ways of extracting profits
However, incorporation is not the right solution for everyone. The decision depends on your profit levels, long term plans, and tolerance for additional administration.
Planning Ahead Is Key
The important thing to remember is that these changes are coming whether you prepare or not.
Businesses that plan ahead will be able to adapt smoothly. Those who leave things until the last minute may find themselves under unnecessary pressure.
Taking time now to review your systems, your income levels, and your accounting processes can help you stay compliant and avoid stress later on.
The Bottom Line
Making Tax Digital for Income Tax will significantly change how self-employed individuals and landlords report their income.
With quarterly updates and digital record keeping becoming mandatory, preparing early will make the transition much easier.
If you are unsure whether the rules will apply to you, or whether your current business structure is still the most efficient option, now is the time to review your position.
Meet Lewis
Lewis is a professional accountant and founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.
Book a call today to learn more about what Lewis and Rhombus Accounting can do for you.
