Five things you need to know about MTD for Income Tax

Making Tax Digital (MTD) for Income Tax will change how eligible sole traders and landlords handle their income tax from April 2026, adding in some new legal requirements.

It's one of the biggest shake-ups in personal tax for a generation. Here are five things you need to know to kickstart your own MTD for Income Tax preparations.

1. MTD for Income Tax starts in April 2026 or April 2027 – or possibly April 2028

• If you have gross income over £50,000, you'll have to start following the MTD for Income Tax rules from April 2026.

• If you have gross income this but above £30,000, you'll have to follow the new rules a year later, in April 2027.

• And in April 2028, if your gross income is over £20,000, you'll have to comply with the new rules.

The government has hinted that MTD for Income Tax will apply to incomes lower than this but hasn't yet made any announcements.

2. Here are the basic MTD for Income Tax requirements

Here's a short summary of what MTD for Income Tax means for you:

• Using compatible software, such as Sage Accounting, you'll need to send HMRC quarterly reports for each source of income. So, if you have a sole trader business but also let a property, you'll need to provide an update to HMRC every three months for both income streams. That's eight in total.

  Of course, modern cloud accounting software like Sage Accounting will automate much of this for you, and you'll usually just need to click a button.

• You must submit a digital income tax return via software by 31 January following the end of the tax year, just as now with Self Assessment. Again, the software will automate much of this. You also pay any tax that's due at that point.

3. MTD for Income Tax is your chance to do things better

MTD for Income Tax offers the perfect opportunity for you to improve your financial processes and manage your business admin more efficiently.

If you're not already using accounting software and are perhaps relying on spreadsheets or even handwritten notes, its introduction will be one of the most revolutionary business upgrades you can make.

Suddenly you'll be able to issue invoices with a single mouse click (or tap of a screen) and get paid faster with Tap to Pay via mobile phones. You'll get reminded of overdue invoices and chase them up in the same easy way.

You'll have the ability to quickly match payments with your bank account. And AI such as Sage Copilot, found in Sage Accounting, will constantly check your finances and tell you of issues or opportunities.

Best of all? You'll never be caught short with your tax bill. If you provide accurate information when submitting your quarterly updates for MTD for Income Tax, you'll have an idea of how much you owe (although it's always best to work with an accountant to get your tax right and take into account other sources of income and gains).

4. You need to opt in to MTD for Income Tax

If MTD for Income Tax applies to you based on the above information, you need to do the following:

• Make sure you're using MTD-compatible software, such as Sage Accounting, or the free Sage Accounting Individual.

• Sign up for MTD for Income Tax with HMRC. This won't be automatic.

• Configure the software, so it knows you're using MTD for Income Tax.

Your accountant (if you have one) can give you a hand with these tasks. It's a good idea to start the conversation now if they haven't already contacted you about this.

5. You might not need to use MTD for Income Tax

Here's a non-comprehensive list of those who aren't covered by MTD for Income Tax (at least not in the first wave of inclusion following the launch in April 2026 – they may be included later):

• Those whose income doesn't come from sole trader or property rental income

• Partnerships, regardless of whether they're incorporated or not

• Those who HMRC agrees are digitally excluded, typically for reasons of location or belief – for example, it may not be possible to get an internet connection where you live because of your remote location, or religious beliefs may prohibit you from using technology in the way that MTD for Income Tax requires

• Taxpayers without a National Insurance number

• Those claiming qualifying care relief, such as foster carers

• Those claiming Married Couple's Allowance or Blind Persons' Allowance

If you believe any of these apply to you, speak to HMRC to confirm. You may need to apply for an exclusion.

Start your MTD preparations today

MTD for Income Tax provides a great opportunity for businesses to do work more efficiently.

Start preparing for the new legislation today and speak to your accountant if you need any support. The outcome will be less time spent dealing with admin and more time doing what you love.

See how Sage Accounting and Sage Individual provide perfect solutions for every kind and size of small business.

Relevant resources

• WEBINAR: Are you ready for Making Tax Digital (MTD)?

• WEBINAR: How to submit your Self Assessment tax return with confidence

• WEBINAR: Your guide to a stress-free Self Assessment tax return

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