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Newsletter issue – October 2025
Making Tax Digital (MTD) for Income Tax begins in April 2026. It will initially affect sole traders and landlords earning over £50,000 annually. The thresholds will gradually lower to £30,000 in 2027 and £20,000 in 2028.
MTD will require the use of MTD-compatible accounting software for Income Tax Self-Assessment (ITSA). Quarterly tax submissions will be made instead of a single annual return.
This government initiative to modernise the tax system by digitising records and submissions was originally announced in 2015, and aims to reduce errors, save time, and combat tax fraud - especially among small businesses. MTD is already in place for VAT-registered businesses and sole traders. It is estimated that 864,000 sole traders and landlords will need to comply.
There are concerns that this change will potentially add administrative and financial burdens for small businesses. The transition phase may cause stress and confusion, especially for those unfamiliar with digital tools. Experts urge better education and support to help businesses adapt. It is also believed that regular quarterly updates will help businesses maintain up-to-date financial records, enabling better cash flow management and early identification of issues.
Let us know if you'd like help preparing for these changes or exploring accounting software options.
