Making Tax Digital (MTD)

As you are probably aware Making Tax Digital for Income Tax comes into effect from 6 April 2026.

The first group of taxpayers to go into the new system are sole traders and landlords. It will not apply to limited companies, or, for now, to partnerships.

If your sole trader business is VAT registered, it is most likely you already use software which will be suitable for making the reports required under MTD.

Those who are most likely to be impacted by the changes are:

• sole traders whose turnover (ie gross sales) is over £50,000 but who are not VAT registered (or, for a few, have been granted an exemption from electronic filing of VAT returns);

  
  

• landlords whose gross rents exceed £50,000;

  
  

• those whose turnover, combining sole trader income and rental income, exceeds £50.000.

The £50,000 threshold applies to the figure on your 2025 tax returns. It is, therefore, important that if you could be caught by this your 2025 tax return is completed as soon as possible, in order that you can prepare for the new regime.

Filing your tax return in January will leave only two months to determine how you are going to comply with the new requirements.

MTD could be a challenge for you!