HMRC has started sending out its first wave of letters to individual taxpayers likely to be affected by the next phase of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA).
Starting April 2026, MTD will become mandatory for self-employed individuals and landlords with income over £50,000 annually (income is defined as gross self-employment income plus gross rental income before expenses as shown on your tax return for the year ended 5 April 2025).
Those earning between £30,000 and £50,000 will be brought into the system from April 2027, and eventually, those earning over £20,000 will be included from April 2028. In short, MTD is coming for a lot of people.
Those affected by the rules will need to keep income and expense records digitally and use MTD-compatible software to submit quarterly updates to HMRC.
If you’re already using accounting software and keeping your records neat and tidy, you’re likely in a good position. But if your current bookkeeping involves a shoebox full of receipts and a once-a-year panic, it’s time to think about going digital or hiring someone who can help.
Modern accounting software doesn’t have to be intimidating. Many platforms are built specifically for non-accountants, featuring intuitive dashboards, mobile access, and helpful reminders to keep you on track. With regular use, you’ll not only stay compliant but also gain a better handle on your business finances. Keeping on top of your numbers throughout the year can help you avoid those eye-watering surprise tax bills. Plus, it will give you a real-time view of how your business is performing so you can make informed decisions.
HMRC will continue to release more guidance in the lead-up to implementation. In the meantime, we’ll be working closely with our clients to ensure they are ready and fully compliant. If you’ve received a letter and you’re unsure what to do next, please don’t ignore it – take a few steps now such as exploring accounting software or speaking to your advisor.
The introduction of Making Tax Digital represents a significant change from the traditional annual tax return but with the right tools and a bit of guidance, it could be less of a tax headache and more of a fresh start for your finances.
The information contained within this publication is given by way of general guidance. Specialist advice should always be sought in relation to your particular circumstances. No liability is accepted by Ensors for any actions taken without seeking appropriate professional advice.
