When do you need to comply with Making Tax Digital for Income Tax rules?
By Clare Kendall, Business Owner & Bookkeeper, CLK Books
I'm here to talk to you today about a letter that HMRC is sending out to sole traders and landlords who are likely to need to follow the Making Tax Digital (MTD) rules for income tax in either April 2026 or 2027. The letters are on their way this Spring. You may even have yours already.
HMRC have based the information in the letter on your business and/or property turnover for tax year 2023 to 2024 - this is the last tax year that you should have submitted a tax return for. Based on that information, HMRC have worked out whether you are likely to need to follow the rules from April 2026 or 2027. The threshold is based on turnover - that's your top line sales figure, not your profit.
| Turnover for 2024-25 | Follow the MTD rules from |
|---|---|
| £50,000 or more | 6th April 2026 |
| £30,000 - £50,000 | 6th April 2027 |
| £20,000 - £30,000 | By the end of this parliament (date to be confirmed) - UPDATE: 6th April 2028* |
Your turnover in the current tax year (April 6th, 2024 to April 5th, 2025) is the one that determines your start date to follow the MTD rules. If your business is growing, winding down or simply fluctuates from year to year, the start date assumed in the letter could be incorrect, meaning that you may have to follow the rules earlier, later or not al all.
The MTD rules mean that you must keep your records digitally and submit to HMRC in a quarterly submission directly from your softare. You must also send an annual submission, which ties everything together in a similar way to the current tax return. It means you are going to need accounting software and most likely a business bank account as well.
There are numerous options for these, some of which are free of charge. Get in touch if you need further help with selecting software.
The best thing you can do right now is to prepare your 2024-25 tax return. If you complete your return in December or January, and your turnover exceeds £50,000, you will have a very small amount of time to get everything in place to comply with the MTD rules by April 2026. You can file your return as early as April 6th 2025, neaning you will know your exact turnover and the date you need to be ready to keep records digitally.
Now is a good time to start looking at accounting software if you don't already have it. You will have the time to choose a solution that suits your business, and is up and running smoothly.
HMRC will send out letters confirming your definitive start date following the submission deadline for your 2024-25 return - 31st January 2026.
For Reference:
Policy paper: Making Tax Digital for Income Tax Self Assessment for sole traders and landlords
Checking tool: Find out if and when you need to use Making Tax Digital for Income Tax