Making Tax Digital for Income Tax

Your Questions Answered (Q&A Guide for Sole Traders & Landlords)

Making Tax Digital (MTD) for Income Tax is on the horizon, and understandably, there’s a lot of confusion around what it means, who it affects, and how to prepare.

We’ve pulled together the most common questions we’re asked into one clear Q&A guide to help you feel confident and ready.

Confusion & Common Misconceptions

Do quarterly updates mean I’ll pay tax four times a year?

Not yet.

However, we do think HMRC may eventually move in this direction.

In the meantime, quarterly information can actually be helpful. It allows you to budget in real time instead of facing one large bill at the end of the year. Setting money aside in a savings account each quarter is a sensible approach until anything becomes mandatory.

Will MTD replace my self-assessment tax return completely?

No.

There are currently no plans to replace the traditional SA100 tax return.

You’ll submit:

Four quarterly updates, and
One final year-end return, just like now.

Is MTD only for big businesses?

“Big business” is a grey term.

HMRC have set the initial threshold at £50,000 turnover, which they estimate will affect over 780,000 taxpayers from the 2026/27 tax year.

Is qualifying income the same as profit?

No.

Qualifying income = turnover (your top-line business income)
Profit = what’s left after expenses

MTD thresholds are based on turnover, not profit.

Thresholds, Timing & Who’s Affected

What if my income is just under £50,000?

You’ll be phased in later.

When the threshold reduces to £30,000, you’re expected to join MTD from the 2027/28 tax year.

What if I cross the threshold during the year?

It doesn’t matter.

HMRC will look at your 2024/25 tax return income to decide if you must join MTD from April 2026.

When does MTD start for sole traders and landlords?

6 April 2026.

Are partnerships included?

Not yet.

Partnership income isn’t currently included in qualifying income unless it relates to jointly owned rental property.

Practical Day-to-Day Questions

How long do quarterly updates take?

It depends on:

Number of transactions
Record-keeping method
Whether you use digital software

Every business is different, so time requirements vary.

What records do I need to keep digitally?

HMRC expect fully digital record keeping.

We support clients in different ways:

If you enjoy bookkeeping → use cloud accounting software (like Xero)
If you prefer to send everything to us → we’ll store and process it digitally for you

Everything is tailored to what’s easiest for you.

Can my accountant handle everything?

Absolutely, Just let us know, and we’ll create a plan that works for you.

What happens if I miss a quarterly deadline?

No fines in the first year (up to 5 April 2027) to help with transition
From April 2027, penalties are expected to follow a points-based system similar to MTD for VAT

Cost, Value & Choosing Support

Will MTD increase accounting fees?

In short, yes, There’s more work involved.

However, you control the cost:

Keep digital records → lower fees
Hand over paper receipts → higher fees

Time is money for accountants.

What are the benefits of going digital beyond compliance?

Real-time insight into your business
Better decision-making and tax planning
Fewer paper receipts and clutter

What’s the difference between DIY and using an accountant?

Accountants:

Know the legislation and allowable claims
Ensure accurate, compliant submissions
Meet deadlines
Handle HMRC enquiries

We also expect HMRC to use quarterly data to flag inconsistencies, so professional oversight is more valuable than ever.

If in doubt, let a professional handle it — just like you wouldn’t fix your own car clutch!

Reassurance & Getting Prepared

What should I be doing now?

Be realistic about your record-keeping habits.

If you usually arrive in January with a bag of receipts, MTD will be difficult alone.

Speak to your accountant early and create a simple plan.

Can I delay or be exempt from MTD?

Delay – no.

Exemptions – very limited, including:

Turnover below £20,000
Religious beliefs preventing digital use
Digital exclusion (no reliable internet or disability preventing use)
Registered blindness

The Big Question: Why Is HMRC Doing This?

To:

Create a level playing field in record keeping
Reduce errors
Improve efficiency
Modernise the UK tax system

Digital systems like Xero also remove the middle-man delays in sharing information with accountants.

Need Help Getting Ready for MTD?

Whether you want full support or just guidance setting up digital records, we’re here to make the transition simple and stress-free.

Get in touch today and let’s prepare your business for Making Tax Digital.