Making Tax Digital – You Need to Start Planning
Chrissy Leach • 4 August 2025
HMRC’s digital transformation is well underway and waiting until the last minute could leave you scrambling
If you're self-employed or a landlord, it’s time to start preparing for Making Tax Digital (MTD). Here’s what you need to know, and what to do now.
What is Making Tax Digital?
Making Tax Digital (MTD) is an HMRC initiative designed to make the UK tax system more efficient, accurate and easier for taxpayers to manage. It replaces traditional paper-based records and manual submissions with a digital-first approach.
MTD affects how businesses and individuals keep their financial records and how they submit tax information to HMRC.
Who Does MTD Apply To?
MTD is being introduced in phases. Here’s a breakdown of who’s affected and when:
✅ Already in place:
- VAT-registered businesses for VAT submissions (Making Tax Digital for Business - MTDfB)
🚨 From April 2026:
- Self-employed individuals and landlords with annual income over £50,000 (Making Tax Digital for Income Tax - MTD for ITSA)
🚨 From April 2027:
- The threshold drops to £30,000
🚨 From April 2028:
- The threshold drops to £20,000
There were plans to implement for corporation tax in the future too but this has been cancelled.
How do you calculate your annual income?
To work out whether you fall within the scope of Making Tax Digital for Income Tax (MTD for ITSA), you need to calculate your total gross turnover - not your profit.
- Self-employment (sole trader income before expenses)
- UK property income (rental income before costs)
This does not include:
- PAYE income (employment)
- Pensions
- Dividends
- Interest
- Any other non-business income
🔍 Important:
You must add together your gross self-employment income and gross property income (if you have both). If the combined total exceeds the threshold, you will fall within MTD for ITSA.
What Are the Key Requirements?
If you're within the scope of MTD for ITSA, you must:
- Keep digital records of your income and expenses
- Use MTD-compatible software to send tax data to HMRC
- File updates quarterly instead of annually
- Submit an end-of-period statement and final declaration annually
Why You Need to Start Planning Now
🔄 Quarterly reporting is a big change
Going from one annual return to five digital submissions (4 updates + 1 final declaration) is a major shift - and not something to leave until the last minute.
💻 You’ll need to use software
Spreadsheets are an acceptable digital record, but you'll need compatible software for the submission to HMRC, or to use accounting software such as Xero, Quickbooks, FreeAgent, Sage etc. If you’re switching systems, you’ll need time to get comfortable with the new setup.
🧾 Better records = fewer mistakes
Digital record-keeping reduces human error, which can lead to fewer HMRC penalties and more reliable cashflow management. The sooner you switch, the better for your business.
📆 Deadlines are coming fast
April 2026 might seem far away, but building the right systems and habits now will save you time, stress, and money later.
How CJL Accountancy Can Help
At CJL Accountancy, we help businesses and landlords prepare for Making Tax Digital with:
✅ Advice on whether MTD applies to you
✅ Support choosing and setting up the right software
✅ Ongoing bookkeeping and tax compliance services
✅ Quarterly and annual reporting support under MTD rules
Whether you're unsure if you're affected or already feeling overwhelmed, we’re here to help you navigate MTD with confidence.
FAQs: Making Tax Digital
Q: Do I need to register for MTD?
A: Yes, you’ll need to register when MTD ITSA applies to your income level.
Q: Can I still use spreadsheets?
A: Spreadsheets can be used with bridging software.
Q: What software do I need?
A: You can either:
- Use spreadsheets + bridging software, or
- Switch to MTD-compatible software like Xero, QuickBooks, FreeAgent or Sage.
We can help you choose the best option.
Q: What if I don’t comply?
A: HMRC will apply penalties for non-compliance, including missed deadlines or failure to keep proper records.
Don’t Wait – Let’s Get You MTD-Ready
Making Tax Digital isn’t going away – and the sooner you act, the easier the transition will be. Whether you’re a landlord or self-employed, CJL Accountancy is here to make things clear, simple, and stress-free.
📞 Get in touch today
to start your digital tax journey with expert support every step of the way.
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