What is MTD for Income Tax? Your Simple Guide

This simple guide explains Making Tax Digital (MTD) for Income Tax.

Learn the key rules for digital records, quarterly reporting, and MTD software relevant to sole traders and landlords

What Is Making Tax Digital (MTD) for Income Tax?

A Shift to Digital Tax Reporting

The government’s Making Tax Digital (MTD) initiative is transforming how self-employed individuals and landlords manage and report their income to HM Revenue & Customs (HMRC). If you’re a sole trader or have property income, MTD for Income Tax Self Assessment (ITSA) will change the way you do your taxes, moving away from a single annual tax return to a more digital and regular system.

This guide explains what these changes mean for you, who is affected, when the changes take place, and how Pier View Accounting can help you navigate this new landscape with confidence, especially if you’re based in Clevedon, Bristol, or across North Somerset.

Understanding the MTD for Income Tax Rollout: Who & When?

MTD for ITSA is being introduced in phases, based on your total qualifying annual gross income from self-employment and/or property:

From April 2026: If your qualifying income is over £50,000 a year, you will need to follow MTD for Income Tax rules.
From April 2027: The income threshold drops, and those with qualifying income over £30,000 a year will need to comply.
From April 2028: The government plans to extend MTD for ITSA to those with qualifying income over £20,000 a year.
Future Considerations: HMRC will keep the situation for businesses and landlords with income below £20,000 under review.

It’s important to assess your income levels to understand when you’ll be mandated to join MTD. If you’re unsure, we can help you determine your MTD start date.

What are the Key Changes with MTD for Income Tax?

MTD for Income Tax introduces three core changes to how you manage your tax affairs:

Digital Record Keeping: You’ll be required to keep digital records of all your business and/or property income and expenses. This means using MTD-compatible software – traditional paper records or simple spreadsheets alone (without bridging software) will no longer be sufficient.
MTD-Compatible Software: You must use software that is recognised by HMRC for MTD to keep your records and submit your updates. Popular options include FreeAgent, Xero, and QuickBooks. As FreeAgent Certified Partners, Pier View Accounting has particular expertise in helping clients get the most from this user-friendly platform.
Quarterly Updates & Final Reporting: Instead of one annual Self Assessment tax return, you’ll need to send summary updates of your income and expenses to HMRC every quarter using your MTD software. Following the tax year, you will also need to submit:
- An End of Period Statement (EOPS) for each business/property source.
- A Final Declaration for all your income (including any non-MTD income like employment or investment income), which finalises your tax liability.

This new system aims to help you stay on top of your tax affairs throughout the year and reduce errors.

How Pier View Accounting Can Help You with MTD for Income Tax

Navigating these MTD changes can feel daunting, especially if you’re used to doing your own tax returns. That’s where Pier View Accounting steps in. We offer friendly, straightforward MTD support for sole traders and landlords in Clevedon, Bristol, and North Somerset.

We can help you:

Understand Your Obligations: We’ll clarify exactly what MTD for ITSA means for your specific situation and when you need to start.
Choose and Set Up Software: As FreeAgent specialists, we can recommend the best MTD-compatible software for your needs, get you set up correctly, and provide training. If you prefer other software, we can support that too.
Transition to Digital Records: We’ll guide you on how to move from paper or spreadsheet records to efficient digital bookkeeping.
Manage Quarterly Updates: We can either train you to manage your quarterly submissions confidently or handle them on your behalf, ensuring accuracy and timeliness.
Prepare EOPS & Final Declaration: We can take care of your end-of-year statements and final tax declaration, ensuring all your income is reported correctly and any allowable expenses are claimed.
Ongoing Support: Provide peace of mind with ongoing advice and support as you adapt to the MTD system.

Our goal is to make MTD as simple and stress-free as possible for you.

Useful Resources for MTD Information

HMRC has published the following useful resources on MTD for Income Tax:

‘Find out if you can get an exemption from Making Tax Digital for Income Tax’ provides information about who is automatically exempt
‘Find out if and when you need to use Making Tax Digital for Income Tax’ provides information about when you need to use Making Tax Digital for Income Tax.
‘Work out your qualifying income for Making Tax Digital for Income Tax’ provides information about what counts as qualifying income from self-employment and property
‘Making Tax Digital for Income Tax for individuals: step by step’ can be used to calculate qualifying income

Prepare for MTD with Confidence

Don’t let Making Tax Digital add unnecessary stress to running your business.

Pier View Accounting is here to provide expert, friendly MTD guidance and ongoing support tailored to your needs as a sole trader or landlord.

If you are a business in Clevedon, Bristol, or North Somerset looking for assistance with MTD for Income Tax, contact us today for a no-obligation chat about how we can support your compliance.

Call us on 0117 427 0470