Preparation matters for MTD changes

Making Tax Digital (MTD) for Income Tax is one of the biggest changes to Self Assessment in decades.

The first phase began in April 2026 for sole traders and landlords with qualifying income over £50,000. From April 2027, the threshold falls to £30,000, before reducing again to £20,000 from April 2028.

The clearest lesson so far is simple: preparation matters. Those already using suitable software and keeping digital records have generally found the transition easier.

MTD should not be viewed purely as a compliance exercise. Keeping records up to date throughout the year gives better visibility over income, expenses and potential tax liabilities. It can also make conversations with your accountant more useful, allowing issues to be identified earlier rather than after the year has ended.

From 6 April 2027, MTD will apply to sole traders and landlords with qualifying income over £30,000. Importantly, this is based on gross income before expenses, not taxable profit.

Taxpayers will need to maintain digital records using compatible software and send quarterly updates to HMRC, followed by their annual tax return through MTD compatible software.

At Pierce, we work extensively with Xero, which can make digital record keeping simpler through features such as bank feeds and automated bookkeeping.

For those joining MTD next April, now is the time to prepare. Moving onto suitable software and developing good digital habits gradually will make the transition far easier and help ensure MTD becomes more than another HMRC deadline.