At Watson Knipe, we're committed to supporting small businesses through important changes in tax reporting. One of the biggest changes on the horizon is the rollout of Making Tax Digital for Income Tax (MTD for ITSA). The next phase becomes mandatory in April 2026, and it's important to start preparing now to avoid disruption later.
Who needs to get ready for MTD for Income Tax?
From 6 April 2026, MTD for Income Tax will apply to individuals who:
- Are registered for Self-Assessment
- Earn income from self-employment, property, or both
- Have a qualifying income of over £50,000 in the 2024–25 tax year
Qualifying income is the total gross income you receive in a tax year from self-employment and property. If your income fits this threshold, HMRC will notify you after reviewing your 2024–25 Self-Assessment return (due by 31 January 2026), confirming that you must begin using the digital service from April 2026.
What does it mean to comply with MTD?
If you're in scope, you will be required to:
- Maintain digital records of your income and expenses
- Use HMRC-compliant software to send quarterly updates and an annual final declaration
- Authorise your chosen software and sign up for MTD (either you or your accountant can do this)
This will replace the traditional Self-Assessment process for those affected.
What if your income is under £50,000?
If your gross income from self-employment and property is £30,000 or less, you do not need to use MTD for Income Tax. However, HMRC has confirmed that individuals earning more than £20,000 will need to join the scheme later – a timeline for this will be announced in due course. Partnerships will also be brought into MTD later.
New to self-employment or property income?
Suppose you become a sole trader or landlord after April 2026. In that case, you won't need to use MTD until after submitting your first Self-Assessment return – but voluntary sign-up is available in the meantime and can help ease the transition.
Can anyone be exempt?
In some cases, exemptions will apply – for instance, if it's not practical or reasonable for you to use digital tools. Some individuals may also be automatically exempt. We recommend seeking advice early if you think this could apply to you.
How we can help
Watson Knipe is here to make the shift to digital tax reporting as smooth as possible. We can advise on the following:
- Whether you need to comply and when
- Choosing MTD-compliant software
- Getting your records ready and setting up processes now
Taking early steps will give you time to adjust and avoid last-minute stress. If you're unsure whether this affects you or need help preparing, contact our team today. You can call us on 01623 490 120 or email