Making Tax Digital (MTD) for Income Tax has finally arrived and many sole traders, landlords and self-employed individuals will need to comply with the new reporting rules.
From 6 April 2026, those with gross income over £50,000 will need to use MTD-compatible software that submits their new digital reports to HMRC.
It can be hard to know which system you need to have in place and which is the right one for you.
However, you must understand the available options now so that you can remain compliant and avoid any unwanted errors or penalties.
What is Making Tax Digital for Income Tax?
MTD is the Government’s initiative to move the UK tax system fully online.
Under MTD for Income Tax, the annual Self-Assessment return will be replaced with a more frequent digital reporting process.
Instead of submitting one annual return, you will be required to keep digital records of income and expenses, submit quarterly updates and complete a final end-of-year declaration.
These submissions must be made using HMRC-recognised software and you must have the right system in place to remain compliant.
If you haven’t already put the steps in place to become compliant, it is important that you do so now. The first reporting deadline is 7 August 2026.
What software is needed to stay compliant?
HMRC does not provide its own software for MTD and you must use compatible software that can:
- Maintain digital records of income and expenses
- Submit quarterly updates directly to HMRC
- Complete the final declaration at the end of the tax year
- Ensure digital links between records
Cloud accounting software
For most, our suggested approach to Making Tax Digital (MTD) compliance is cloud accounting software.
This is secure, website-based software that you access through your browser or mobile app – meaning you can view and update your records anytime, from anywhere.
These solutions can manage your bookkeeping, bank feeds, invoicing, expense tracking and MTD submissions all-in-one system.
Our recommended platform is Xero, with over 4.6 million subscribers worldwide.
As a Platinum Xero Partner, we provide full set-up and tailored training for sole traders and landlords and we pass on a partner discount when recharging subscriptions through us.
We also partner with Dext and recommend their dedicated MTD solution for sole traders and landlords who want a straightforward way to meet the new quarterly reporting requirements.
Dext focuses specifically on digital record-keeping and MTD submissions.
It offers multiple data capture methods, including secure email forwarding, mobile app receipt capture, supplier integrations and bank data imports. This allows you to keep digital records up to date throughout the year.
These platforms are ideal if you’re looking for automation, efficiency and real-time visibility.
They provide up-to-date financial information and meaningful insights, supporting better decision-making and helping you stay compliant with HMRC’s digital requirements.
What should you look for when choosing MTD software?
Choosing MTD software is about more than basic compliance. The right system should support how you run your business and reduce the administrative pressure on you.
You should consider:
- Income reporting – The software must support all relevant income streams, including self-employment, UK property and foreign property income where applicable.
- Direct HMRC integration – It should be fully MTD-compatible and allow for quarterly updates and a final declaration to be submitted directly to HMRC.
- Clear digital record-keeping – The system must maintain compliant digital records and ensure proper digital links between transactions and submissions.
- Ease of use – A straightforward dashboard and clear reporting system will make your day-to-day bookkeeping more manageable.
- Automation – Bank feeds, automatic transaction categorisation, VAT calculations (if applicable) and error alerts can all reduce manual input and improve accuracy.
- Scalability – The software should be capable of supporting business growth, additional income streams and future potential VAT registration.
How can we support your MTD for Income Tax requirements?
Landlords and self-employed individuals who fall into the first phase of MTD for Income Tax must act now to find the right software for them to ensure their compliance.
Our dedicated digital team can support you by reviewing your current bookkeeping setup and advising on the software best suited to you and your business.
Having the right software and professional support in place can help make MTD for Income Tax more manageable.
For further advice or support on your MTD for Income Tax requirements, contact our team today.
