From April 2026, Making Tax Digital for Income Tax Self‑Assessment (MTD for ITSA) will apply to sole traders and landlords who earned more than £50,000 in the 2024/25 tax year.
We understand for some this might sound like a big change, but when breaking it down further, it’s really just about keeping your income and expenses in a digital format and sending HMRC an update every few months.
Once you’re set up, you should feel more organised and better equipped to stay on top of things throughout the year.
What you’ll need to record digitally:
From April 2026, when Making Tax Digital comes into force, you’ll need to keep track of any income and expenses from your self‑employment or rental properties.
What you need to record will differ slightly depending on whether you’re a sole trader or a landlord, but it’s all quite straightforward once you know what applies to you.
Landlords:
You’ll need to keep records of:
- Rent received from tenants
- Lease premiums and any reverse premiums
You’ll also need to record property expenses, such as repairs, maintenance, and any other costs related to managing the property.
Joint-letting landlords:
If you share ownership of a property, you’ll only need to record your own share of the income and expenses, nothing more. There are also some simplified rules that might make things easier for you, so it’s worth having a quick chat with your accountant to see what applies in your situation.
Sole traders:
You’ll need to keep digital records of:
- Sales and takings (including fees deducted by payment platforms like Stripe or eBay)
- Business expenses, such as goods, travel, office costs, or bank charges
Retailers can simplify their record keeping by creating a single entry for each day’s takings instead of recording every individual sale.
Each digital record should include:
- The date the transaction happened
- The amount of the transaction
- The category it falls under, based on how you’ve set up your bookkeeping
If you have more than one source of income:
You’ll need to keep separate digital records- and send separate quarterly updates- for each self‑employment business you run.
If you’re a landlord, it’s a bit simpler. All your UK properties can be grouped together as one ‘pot’ of income, but any overseas properties will need their own records and their own submissions.
Using a HMRC approved software such as Xero [Link] can make all of this much easier. You can manage different income streams in one place and submit all your quarterly updates under a single licence, so it feels much more streamlined.
What doesn’t need to be recorded digitally:
Not everything needs to go into your digital records. In fact, a few things don’t have to be included in your quarterly submissions at all:
- PAYE income, partnership income, or dividends
- Disallowable expenses (e.g. gym memberships, personal subscriptions, daily commuting, or personal phone bills)
- Capital purchases, such as property or equipment acquisitions (check this point with your accountant)
If you’d prefer to keep all your finances in one place, you can still add PAYE or dividend income into your accounting software: it’s just optional, not required.
Creating digital records, the easy way
The simplest way to keep on top of your digital records is to use HMRC‑approved accounting software. It handles the heavy lifting for you, pulling in the information you enter (like invoices or bank transactions) and turning it into the quarterly submissions HMRC needs.
When choosing your software, it is important to ensure you are taking in to consideration what works best for you and your business.
Xero is a great example of a use-friendly software, it allows you to keep everything in one place and, in most cases, lets you manage multiple trades under a single license, making the whole process feel much smoother.
Read more about our partnership with Xero here.
Save time with smart automation
Modern accounting tools make keeping digital records easier than ever. With the right software, you can:
- Link your bank account securely through Open Banking to automatically create records
- Use mobile apps to scan and store receipts or invoices digitally
- Automate data entry to reduce repetitive bookkeeping tasks
Combining these tools with regular check‑ins from your accountant can save you hours every year, and free up more time for you to focus on running your business.
How can we help with MTD for income tax?
We’re here to make your move to MTD as smooth and stress‑free as possible. We’ll support you with set‑up, training, and ongoing guidance, so Sole Traders and Landlords can feel confident, prepared, and well ahead of the curve before the new rules come in.
We’ve partnered with Xero to give our clients a simple, reliable way to stay on top of their digital records. For those affected by the 25/26 tax year changes, we’re recommending Xero’s Simple plan: it’s easy to use, keeps everything in one place, and makes quarterly submissions feel much more manageable.
Every business has different needs, so we’ve created three flexible support options to help you choose what feels right for you:
1: Do it alone:
We’ll give you all the tools and training you need to use Xero Simple confidently and file your quarterly updates on your own. And don’t worry: our experts are always just a message or call away if you need a bit of extra guidance throughout the year.
2: Do it with me:
You’ll handle your day‑to‑day digital records, and we’ll step in each quarter to review everything before it’s submitted. It’s a great option if you want reassurance that your reporting is accurate and fully compliant.
3: Do it for me:
If you’d prefer a hands‑off approach, we can take care of the whole process. We’ll provide the software, process your records, and submit your returns for you when the time comes. You just send us the business information, and we’ll handle the rest.
