*Sole traders and landlords* Updated guidance on Making Tax Digital and what it means for you - 21st May 2025

HMRC has issued updated guidance on Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA). From April 2026, sole traders and landlords with annual income over £50,000 per year must:

1. Keep digital records of income and expenses

2. Submit quarterly updates using MTD compatible software

3. Provide an end-of-period statement and a final declaration each year

The £50,000 is income is gross before deductions and tax.

From April 2027, the same rules will apply to those with a qualifying income over £30,000 and then April 2028 if over £20,000.

The impact

The changes mark a significant shift in how tax is reported for those impacted:

• Increased admin - more frequent reporting and digital record-keeping will require new habits and possibly new software.

• Higher costs – MTD compliant software may carry subscription fees and individuals may need more frequent professional support.

• Improved accuracy - regular digital submissions aim to reduce errors and improve compliance.

• Real-time view of tax liability - quarterly updates provide a clearer view of ongoing tax liabilities helping individuals to better understand their tax position throughout the year.

• Transition challenges - smaller or less digitally confident businesses may struggle without support.

 HMRC encourages early adoption to prepare for the changes.

 Matt Ellis, accountant and associated professional from LFM Certified Accounts shared his comments:

Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) was originally announced by HMRC in the 2015 Budget, with the first phase of MTD being implemented for VAT registered businesses from April 2019.

After several years of delays, HMRC now appear committed to implementing the rules for sole traders and landlords in April 2026, April 2027 and April 2028.

As was seen with the introduction of MTD for VAT registered businesses, the benefits of digitisation include the increased quality and accuracy of the data submitted to HMRC. The regular submission of information to HMRC on a more timely basis can only be a positive to clients and the accountancy profession as a whole.