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The UK’s Making Tax Digital (MTD) initiative is set to transform the way businesses and landlords handle their tax affairs. From April 2026, the new rules will apply to sole traders and landlords with an annual income of over £50,000, with those earning over £30,000 following in April 2027. These changes mark a significant shift towards digital record-keeping and more frequent tax reporting. It is important to bear in mind that if you are both a landlord and a sole trader, your total income from both sources will be combined and assessed against the £50,000 and £30,000 thresholds.
A crucial aspect of MTD is determining who needs to comply, which is based on the qualifying year. HMRC has confirmed that the 2024/25 tax year will be used to assess whether landlords and sole traders meet the income thresholds. This starting list will define those required to comply when the rules come into effect.
It is important to clarify what HMRC considers as ‘income’ in this context. Income refers to the total revenue before the deduction of expenses, not the profit after expenses. For landlords, income is not the amount received in their bank account after deductions, but rather the gross rental income before expenses, service fees, commissions, and other deductions. Similarly, for sole traders, income refers to total turnover before any business expenses are subtracted.
If your combined income from self-employment and property rentals has already exceeded £50,000 in the 2023/24 tax year, you must start preparing now for this change. Ensuring that your records, accounting software, and reporting processes align with MTD requirements will help make the transition smoother and avoid compliance issues.
Making Tax Digital is a government-led initiative aimed at modernising the tax system by transitioning from traditional annual tax returns to a more dynamic, digital model. The goal is to reduce errors, improve efficiency, and provide taxpayers with a clearer, real-time view of their financial obligations.
This is an evolving topic, and HMRC continues to refine its approach to MTD for ITSA. We are keeping a close eye on developments and will provide further guidance as more details become available.
The MTD requirements will apply to:
With the transition to MTD approaching, it’s crucial to start preparing early. Here are some practical steps to get ready:
Our team at CooperFaure is here to support you every step of the way. We offer:
Avoid the last-minute rush—get your business ready for these substantial changes now! If you have any questions or would like to discuss how MTD might affect your business or rental income, use the link below to set up a meeting with us.
📅 Schedule Your MTD Consultation
We’re here to make this transition as smooth as possible for you!
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