Making Tax Digital (MTD) for Income Tax is bringing significant changes to the way landlords and self-employed individuals manage and report their tax affairs.
With the next phase of the scheme beginning on 6 April 2027, thousands more taxpayers will be required to keep digital records and submit regular updates to HMRC.
If you’re a landlord or self-employed individual earning more than £30,000 a year in qualifying income, now is the time to start preparing.
At A&C Chartered Accountants, we’re helping individuals and small business owners understand the changes and make the transition to Making Tax Digital as straightforward as possible.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax is part of HMRC’s ongoing programme to modernise the UK tax system.
The aim is to make tax reporting more accurate and efficient by requiring taxpayers to maintain digital financial records and submit information using compatible software.
Instead of relying solely on an annual Self Assessment tax return, affected taxpayers will need to keep digital records of their income and expenses and provide quarterly updates to HMRC.
They will also need to complete their year-end tax reporting obligations.
For many landlords and sole traders, this represents one of the biggest changes to the Self Assessment system in recent years.
Who needs to register for Making Tax Digital in April 2027?
From 6 April 2027, Making Tax Digital for Income Tax will become mandatory for eligible landlords and self-employed individuals with qualifying income above £30,000 in the 2025/26 tax year.
Qualifying income includes:
- Gross income from self-employment.
- Gross rental income from property.
- A combination of self-employment and property income.
Importantly, the threshold is based on your gross income before expenses are deducted, rather than your taxable profit.
For example, if you’re a landlord receiving £20,000 in annual rental income and also earn £15,000 from self-employment, your combined qualifying income would be £35,000.
This means you could fall within the Making Tax Digital requirements from April 2027, even if your profit after expenses is considerably lower.
What will change under Making Tax Digital?
For those required to join MTD for Income Tax, the way financial information is recorded and submitted to HMRC will change.
The main requirements include:
- Keeping digital records of business or rental income and expenses.
- Using MTD-compatible accounting or bookkeeping software.
- Submitting quarterly updates to HMRC.
- Completing the required year-end tax reporting through compatible software.
Quarterly updates will provide HMRC with regular summaries of income and expenses throughout the tax year.
However, these updates are not the same as submitting four full tax returns. Taxpayers will still need to finalise their tax position after the end of the tax year.
What software will you need for Making Tax Digital?
One of the biggest changes for many landlords and self-employed individuals will be the requirement to use compatible digital software.
If you currently manage your finances using paper records or basic spreadsheets, you may need to change how you record and report your income.
There are several software options available, including cloud-based accounting platforms and compatible bridging software.
At A&C Chartered Accountants, we’re a Xero Platinum Partner and can help clients explore suitable digital bookkeeping solutions based on their individual needs.
Choosing the right software early can make it easier to manage your records, monitor your finances and meet HMRC’s reporting requirements.
Why should you prepare for MTD now?
Although April 2027 may seem some time away, leaving preparations until the last minute could create unnecessary pressure.
Moving to digital record-keeping can take time, particularly if you have previously relied on paper records or have multiple sources of income.
Preparing early gives you the opportunity to:
- Review your current bookkeeping processes.
- Understand whether you meet the qualifying income threshold.
- Choose appropriate MTD-compatible software.
- Get comfortable maintaining digital financial records.
- Understand your quarterly reporting responsibilities.
- Reduce the risk of errors and missed deadlines.
Getting organised now will help make the transition smoother when the new requirements become mandatory.
What happens if you don’t comply with Making Tax Digital?
Once you’re required to use MTD for Income Tax, you will need to meet the relevant digital record-keeping and reporting requirements.
Failure to comply could result in penalties under HMRC’s points-based penalty system, depending on the circumstances.
Taking action ahead of the deadline can help you avoid unnecessary complications and ensure you’re ready for the new reporting requirements.
How can A&C Chartered Accountants help?
Making Tax Digital doesn’t have to be complicated, but understanding what is required and putting the right systems in place is essential.
At A&C Chartered Accountants, we work with landlords, sole traders and small business owners to help them stay compliant with HMRC’s requirements.
Whether you’re unsure if MTD applies to you, need help choosing compatible software or want support with your bookkeeping and quarterly submissions, our team is here to help.
If your qualifying income exceeded £30,000 in the 2025/26 tax year, now is the time to review your position.