If you're a sole trader or landlord and you've started hearing the phrase "Making Tax Digital" a lot more often this year, you're not imagining it. From April 2026, it stopped being something on the horizon and became something you actually have to do. Here's what it means in plain English, who it affects, and what you need in place.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax Self Assessment (usually shortened to MTD ITSA) is HMRC's move away from the old once-a-year tax return, towards keeping digital records throughout the year and sending HMRC quarterly updates instead. Rather than gathering everything up in January and filling in one form, you'll be submitting a running summary of your income and expenses four times a year, with a final declaration at the end.
The records themselves don't need to live in expensive software — HMRC's requirement is about the records being digital and the updates being submitted through compatible software, not about which specific product you use.
Who's affected, and when
MTD ITSA is being phased in based on how much you earn from self-employment or property income (or both combined):
- From April 2026: if your qualifying income is over £50,000, MTD already applies to you.
- From April 2027: the threshold drops to £30,000.
- From April 2028: it drops again to £20,000.
Put together, this brings in an estimated 2.25 million sole traders and landlords over the next couple of years — a huge number of people who, until now, may have managed everything quite happily in a spreadsheet.
What records you actually need to keep
The rules require digital records of your business income and expenses — kept as they happen, rather than reconstructed at year-end. In practice that means:
- A digital record of every transaction relating to your self-employment or rental income
- Expenses categorised in a way that maps to HMRC's standard categories (things like office costs, travel, professional fees, repairs and maintenance)
- Quarterly summaries submitted through software compatible with HMRC's systems
This is where a lot of people get stuck. Many sole traders already keep good records — they're just sat in a personal spreadsheet, formatted however makes sense to them, not in a format any software recognises.
Get MTD-ready without learning new software
MTDPrep turns your bank statement into HMRC-categorised records, ready for your bridging software. Join the waitlist and get three months free when we launch.
What is bridging software?
Bridging software is the tool that actually connects your records to HMRC — it takes your figures and submits them in the format HMRC's systems require. Tools like 123 Sheets, Absolute Excel, and VT / VitalTax are built specifically for this job: you feed in your numbers, and they handle the submission side of MTD.
What bridging software generally isn't built for is turning a messy bank statement into categorised records in the first place — that part is usually left to you, which is exactly where most of the manual effort still sits.
Why full accounting software isn't always the answer
The obvious solution offered by most of the market is to move your whole business onto a full accounting platform. For some businesses that's the right call. But if you've been managing perfectly well with a spreadsheet, paying £30+ a month for software you'll spend weeks learning — just to satisfy a quarterly reporting requirement — can feel like a lot of cost and complexity for what should be a fairly mechanical task.
That's the gap MTDPrep is built for: turning your bank statement into tidy, HMRC-categorised records you can hand straight to whichever bridging software you already use, without needing to learn or pay for a full accounting system.
What to do next
If you're over the £50,000 threshold, MTD already applies to you, so it's worth getting your record-keeping sorted sooner rather than later. If you're between £30,000 and £50,000, you've got until April 2027 — but the habits and tools you put in place now will carry you through when your turn comes.
Either way, the goal is the same: digital, categorised records, submitted on time, without it taking over your week.
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