Making Tax Digital (MTD) for income tax: A Guide for businesses and landlords

The next major phase of HMRC's Making Tax Digital (MTD) is fast approaching. From April 2026, the way self-employed individuals and landlords record and report their income will fundamentally change, marking the end of the traditional annual tax return for millions. The deadline is closer than you think, but there is no need to panic. Our local MTD specialists are here to guide you through every step, ensuring you are compliant, confident, and in control.

Key MTD for income tax self-assessment (ITSA) deadlines

It is crucial to understand which deadline applies to you.

• From April 2026: MTD for ITSA will be mandatory for sole traders and landlords with a qualifying total business and/or property income above £50,000 per year.
• From April 2027: The scheme extends to sole traders and landlords with a qualifying income above £30,000 per year.
• MTD for VAT: This is already in effect and mandatory for all VAT-registered businesses.

What is changing with MTD for income tax?

MTD for ITSA moves away from a single annual tax return and introduces a new digital-first process. The core requirements are:

• Digital records: You must keep all your business and/or property records digitally.
• MTD-compliant software: You need to use specific software (like Xero, Sage, or QuickBooks) or bridging software to connect to HMRC's systems.
• Quarterly updates: You will be required to send summary updates of your income and expenses to HMRC every three months through your software.
• Final declaration: After the tax year, you will finalise your income, claim any reliefs, and submit a final declaration to HMRC, which replaces the traditional self-assessment tax return.

Our MTD solutions for your business or property portfolio

As Xero Platinum Partners with years of experience guiding clients through the MTD for VAT transition, we have a proven, stress-free process. We offer two main solutions to get you MTD-ready.

1. Fully managed MTD service
   The ideal choice if you want to focus on running your business or managing your properties. Simply provide us with a digital bank feed (which is very easy to set up), and our local team will handle all your digital record-keeping, quarterly submissions, and final declaration.
2. Guided MTD setup & training
   For those who want to manage their own records, we empower you with the tools and training to do it confidently. We leverage our extensive experience to help you set up the right digital accounting system (like Xero), ensuring you can manage your MTD requirements efficiently.

Who does MTD for ITSA affect?

MTD for sole traders & businesses

If you are registered as self-employed and your total gross income from your business exceeds the thresholds (£50,000 from 2026, £30,000 from 2027), you will need to comply with MTD for ITSA.

MTD for landlords

If you receive income from UK property and your total gross rental income exceeds the thresholds, you will also fall under the MTD for ITSA rules. This applies even if you are not running a formal business.

Why choose Armstrong Watson as your MTD partner?

• Proven expertise: We have successfully migrated thousands of clients to digital platforms for MTD for VAT. We know the process, the software, and how to make the transition seamless.
• Xero platinum partners: As leading UK partners for Xero, we have an unparalleled understanding of the best software to make MTD an opportunity, not a burden.
• Local, personal support: We have local teams based across northern England and Scotland, providing accessible and knowledgeable support for local businesses and landlords.
• A chance to improve: We see MTD as an opportunity to gain better control over your financial information, enabling real-time insights, easier budgeting, and improved access to finance.