As a sole trader or landlord in the UK, you need to be aware of the upcoming changes related to Making Tax Digital for Income Tax. This guide will provide you with all the necessary information you need to know, including key dates, what you need to do, and how Braceys Accountants can help you ensure compliance.
Explanation of Making Tax Digital for Income Tax
The Making Tax Digital (MTD) initiative from the UK government aims to modernise the tax system and make it easier for individuals and businesses to keep track of their tax obligations. Starting from April 2026, all self-employed individuals and landlords with an annual income above £50,000 will need to comply with the MTD regulations for Income Tax.
Complying with the MTD regulations is crucial for sole traders and landlords to avoid penalties for non-compliance. Failure to comply can result in significant financial costs and reputational damage.
This guide will provide you with all the necessary information you need to know about the MTD initiative and how it applies to sole traders and landlords. We will cover key dates, what you need to know, what you need to do to ensure compliance, and how Braceys Accountants can help you through the transition.
Key Dates to Note
A. April 2026: Mandatory for all self-employed individuals and landlords with income above £50,000.
The MTD regulations for Income Tax will become mandatory for all self-employed individuals and landlords with an annual income above £50,000 from April 2026. This means that affected businesses will need to keep digital records of their income and expenses and submit quarterly reports using HMRC-approved software.
B. April 2027: Mandatory for all self-employed individuals and landlords with income between £30,000-£50,000.
What Sole Traders and Landlords Need to Know
A sole trader is a self-employed individual who runs their own business and is responsible for all aspects of it. This includes financial record keeping and tax reporting.
Under the new MTD regulations, sole traders and landlords must keep digital records of all their income and expenses. This is a key change from the traditional paper-based record-keeping method. Digital records must be kept using HMRC-approved software.
To comply with MTD, sole traders and landlords need to use HMRC-approved accounting software to keep their digital records. This software must be compatible with the MTD for Income Tax regulations.
Under the MTD regulations, businesses will need to submit a quarterly summary of their income and expenses. This will replace the annual tax return process. The first quarterly report is due one month after the end of the first quarter of the tax year.
At the end of the tax year, businesses will need to submit an annual tax return using their digital records. The deadline for submission is 31st January following the end of the tax year.
There are penalties for non-compliance with the MTD regulations, so it’s important for businesses to be aware of the requirements and take the necessary steps to comply
What Sole Traders and Landlords Need to Do
Get Ready for Digital Record Keeping
To prepare for MTD, sole traders and landlords need to get ready for digital record keeping. This involves ensuring that all business records are stored digitally and that the accounting software they use is HMRC-approved and compatible with MTD for Income Tax.
Choose the Right Software
Choosing the right software is crucial for compliance with MTD for Income Tax. HMRC has a list of approved software providers, and it’s important to choose a provider that meets the specific needs of your business.
There are several HMRC-approved accounting software providers, including Xero, Quickbooks, and Sage. At Braceys, we are proficient in multiple accounting software platforms and hold a Platinum partnership status with Xero. We offer services that cover setting up your accounting system, providing training, and addressing any general support queries. If you prefer to focus on other aspects of your business, we can even manage the system and input data on your behalf.
Ensure Your Software is Compatible with Making Tax Digital for Income Tax
To ensure compliance, it’s important to ensure that your accounting software is compatible with MTD for Income Tax. This means that it can send and receive information to and from HMRC automatically.
Submit Quarterly Reports on Time
To comply with the MTD regulations, businesses need to submit quarterly reports on time. This means submitting a summary of your income and expenses for the previous three months, and it must be done using HMRC-approved software.
Submit Your Annual Tax Return on Time
At the end of the tax year, businesses will need to submit an annual tax return using their digital records. The deadline for submission is 31st January following the end of the tax year. Failure to submit on time can result in penalties and fines.
How Braceys Accountants Can Help
Expert Advice and Support
At Braceys Accountants, we understand that the new MTD regulations can be overwhelming for sole traders and landlords. That’s why we offer expert advice and support to help you through the transition.
Guidance on Choosing the Right Software
Choosing the right software can be a daunting task. Our team can provide guidance on choosing the right HMRC-approved software that meets the specific needs of your business.
Assistance with Quarterly Reports and Annual Tax Returns
Submitting quarterly reports and annual tax returns can be time-consuming and confusing. We can help you complete these reports accurately and on time to ensure compliance with the new regulations.
Minimising Penalties for Non-Compliance
Non-compliance with the MTD regulations can result in penalties and fines. Our team can help you ensure compliance and minimize the risk of penalties and fines.
In summary. To comply with the new regulations, it is essential to be aware of the key dates, what you need to know, and what you need to do. To avoid penalties for non-compliance, it’s crucial to start preparing for MTD now. We encourage all sole traders and landlords to seek professional advice and support to comply with MTD for Income Tax. Our team at Braceys Accountants can offer the expertise and guidance you need to navigate the new regulations with confidence.