Making Tax Digital (MTD) for the self-employed in the UK from 2026 - what changes and how to prepare?

For several years the British tax system has been going through a gradual digital revolution. The Making Tax Digital (MTD) programme is one of the biggest steps in this direction. Until now, many self-employed people have relied on simple Excel spreadsheets, notes or even paper records. Soon, that approach will no longer be enough.

From 6 April 2026, new rules will cover people running a business and those earning income from renting out property. For many, this means a completely new way of keeping their books and dealing with HMRC.

What is Making Tax Digital about?

Making Tax Digital is a programme introduced by HMRC with the aim of moving tax reporting into the digital world. In practice, this means moving away from a single annual return towards more regular reporting.

Instead of preparing everything “at the last minute” once a year, taxpayers will be required to keep up-to-date digital records and send data to HMRC during the tax year.

It is a big change, but it has its upsides too. Regular reporting lets you keep better control of your finances, avoid tax surprises and catch any errors sooner.

Who does MTD apply to?

The new rules will cover people who:

• run a sole trader business (self-employed)

• rent out property (both in the UK and abroad)

• file through the Self Assessment system

• reach a certain level of income

The key word here is “income” - this is not about profit, but total receipts before deducting costs. This is very important, because many people wrongly assume that what counts is take-home earnings.

When does MTD take effect?

The rollout of MTD has been staggered over time and depends on the level of so-called qualifying income, i.e. total receipts from your business and/or property rental before deducting costs.

The obligation is being introduced in stages:

• if your qualifying income exceeded £50,000 in the 2024-2025 tax year -> obligation from 6 April 2026

• if it exceeded £30,000 in 2025-2026 -> obligation from 6 April 2027

• if it exceeded £20,000 in 2026-2027 -> obligation from 6 April 2028

This means that in the coming years Making Tax Digital will cover the vast majority of self-employed people and property owners in the UK.

In practice, this means larger businesses will be covered by the new obligations sooner, but over time the system will also take in smaller businesses and people earning rental income.

What exactly will change?

For many self-employed people, the biggest change will not be the tax itself, but how it is reported.

People covered by MTD will be required to:

1. Keep their books digitally

Forget about notebooks or a single Excel file updated “from time to time”. Data will have to be kept in an MTD-compatible system.

2. Submit reports every three months

Instead of one annual return, there will be so-called quarterly updates, sent to HMRC four times a year.

It is worth stressing: these are not final tax returns yet, but reports showing your current financial position.

3. Submit an annual summary

At the end of the year, a final declaration will still be required - but also in digital form, through appropriate software.

Does this mean more work?

At first glance - yes. More reports, new tools, new obligations.

But in practice, a lot depends on how you approach it. People who already keep orderly books often find this change a natural step forward.

On the other hand, putting everything off “until January” will no longer be possible - and for many, that will actually be a huge advantage.

The most common mistakes and worries

From experience, we know there is a fair amount of misunderstanding around MTD. The most common examples are:

• “This doesn’t apply to me because I don’t make much profit” - what counts is income, not profit

• “Excel will do” - only if it is MTD-compatible and properly integrated

• “I’ll do it once a year like before” - unfortunately, that will no longer be possible

Many people also worry about the technology, but today’s accounting software is increasingly intuitive and designed for people with no accounting knowledge.

How can you prepare now?

The best thing you can do is not wait until the last minute.

It is worth doing the following now:

• get your books in order

• start using accounting software

• record your income and costs regularly

• check whether and when MTD will cover you

That way, the transition to the new system will be smooth rather than stressful.

Summary

Making Tax Digital is a change that cannot be avoided - but you can prepare for it well. For some it will be an obligation, for others a chance to gain better control over their finances and get their business in order.

It may seem complicated at first, but in practice it all comes down to one thing: regularity and the right tools.

If you want to be sure everything works as it should, from choosing software to reporting correctly, it is worth drawing on the support of people who deal with this every day. That way, instead of worrying about the rules, you can focus on growing your business.

What should you do if MTD applies to you?

Although the new rules may seem complicated, you don’t have to grapple with them on your own. Our firm helps self-employed people and property owners in the UK use Making Tax Digital - the digital reporting system for HMRC - smoothly and without errors, guiding you step by step through all the required processes. If you want to check whether and from when MTD will cover you too, get in touch with us.

FAQ - the most frequently asked questions about Making Tax Digital (MTD)