By Emily Coltman FCA, Chief Accountant at FreeAgent
Starting from April 2026, Making Tax Digital for Income Tax will begin to replace Self Assessment for most self-employed individuals and unincorporated landlords in stages. Instead of filing a tax return on paper or online once a year, affected taxpayers will need to keep digital records and send updates to HMRC every quarter, as well as complete an annual final declaration.
While it may seem daunting at first, understanding what’s required and preparing early will help make the transition as smooth as possible.
What’s changing from 2026?
If you’re a sole trader or landlord with total business or property income over £50,000, you’ll be required to follow the new rules from April 2026. The threshold is set to drop to £30,000 in April 2027, and to £20,000 in April 2028, meaning even more people will soon be affected. Instead of a single annual tax return, you’ll need to send quarterly updates to HMRC using compatible software, along with a year-end declaration to confirm your income and expenses.
Here are our top tips for preparation:
1. Find out if you’ll be affected
The first step is simple: check whether your business or property income for the previous tax year puts you above the new thresholds. If your income is over £50,000 for the tax year 2024/25, you’ll be included from April 2026. If it’s between £30,000 and £50,000 for 2025/26, you’ll join the scheme a year later, and if it’s between £20,000 and £30,000 for 2026/27, your joining date will be April 2028. Understanding where you stand now will give you plenty of time to prepare.
2. Start keeping digital records
One of the biggest changes is the requirement to maintain digital records of your income and expenses. If you’ve been using paper or standalone spreadsheets up until now, it’s important to consider moving to an accounting software solution that’s compatible with HMRC’s requirements.
Businesses that embrace digitalisation are typically more agile and adaptable, better positioned to innovate, and able to respond quickly to new challenges or opportunities. Early adopters frequently report improved confidence in their financial management, a reduced administrative burden, and increased capacity for value-adding activities.
3. Get familiar with quarterly updates
Instead of gathering everything together in a rush at the end of the tax year, you’ll need to send HMRC an update every three months. This means getting into the habit of recording your business transactions regularly and reviewing your figures each quarter. Setting aside time every month to update your records can make this process much less stressful.
Not only will this make compliance easier, but it will also give you a clearer, more up-to-date picture of your business’s financial health, helping you to forecast, plan, and make informed decisions with confidence.
4. Prepare for the annual declaration
After your four quarterly updates, you’ll complete a final declaration at the end of your accounting period. This is your chance to make any adjustments and confirm your overall tax position for the year. While this may sound similar to the current Self Assessment return, the key difference is that the groundwork will have been laid throughout the year, making the year-end process more straightforward.
5. Give yourself time to adapt
Change always takes a little getting used to, but there’s plenty you can do now to ease the transition. Start by learning about digital record-keeping and what software options are available. If you have an accountant or bookkeeper, talk to them about how they can help you prepare. And if you handle your own finances, take this opportunity to review your processes and get comfortable with the new routine.
Turning change into an opportunity
Making Tax Digital for Income Tax is a significant change, but it’s designed to make tax administration simpler, more accurate, and less prone to last-minute surprises. By preparing early and adopting digital habits, you’ll not only stay compliant with HMRC but also gain a clearer view of your business finances throughout the year.
Change always brings challenges. The learning curve, upfront investment in software, and need for training can seem daunting. But with the right support, clear guidance, accessible training, and responsive customer service, these hurdles are manageable.