Making Tax Digital: What UK Clients Need to Know

The UK tax system is undergoing a massive shift. HM Revenue & Customs (HMRC) is phasing out the traditional annual tax return process in favour of a digital-first approach. This initiative, called Making Tax Digital (MTD), aims to make tax administration more effective, more efficient, and easier for taxpayers to get right.

Many of our clients have reached out with questions about what this means for their finances. Change can feel overwhelming, especially when it involves HMRC. However, understanding the rules now gives you plenty of time to prepare.

In this guide, we break down exactly what Making Tax Digital means for you. We will answer your most common questions, explain the upcoming deadlines, and show you how to navigate this new system without the stress.

What is Making Tax Digital?

Making Tax Digital is a government initiative designed to digitise the UK tax system. Instead of waiting until the end of the tax year to sort through receipts and file a single massive return, taxpayers will use compatible software to keep digital records.

You will then send quarterly updates to HMRC directly through this software. The goal is to reduce errors, prevent tax evasion, and give taxpayers a clearer, real-time picture of how much tax they owe.

For Value Added Tax (VAT), MTD is already in full effect. All VAT-registered businesses must now keep digital records and use software to submit their VAT returns. The next phase, known as Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), will impact self-employed individuals and landlords.

When does it start?

The rollout for Income Tax has faced a few delays, but HMRC has now set firm deadlines. The timeline depends entirely on your income level.

If you are a self-employed individual or a landlord, the rules will apply to you from:

• 6 April 2026: For those with an annual qualifying income over £50,000.
• 6 April 2027: For those with an annual qualifying income between £30,000 and £50,000.

General partnerships will be brought into the MTD system at a later date, which HMRC has not yet confirmed. It is crucial to look at your current income levels now to know which deadline applies to you.

Does it apply to me?

MTD for Income Tax applies to you if you are registered for Self Assessment, and your combined income from self-employment and property exceeds the thresholds mentioned above.

If your total qualifying income falls below £30,000, you are currently exempt from the mandatory MTD rules. You can continue filing your Self Assessment tax return the traditional way, although you have the option to voluntarily join the MTD programme if you want to digitise your records early.

Income above £50,000: is this gross or net?

This is one of the most common questions we hear at RHJ Accountants. The £50,000 (and the future £30,000) threshold refers strictly to your gross income.

Gross income means your total turnover or total revenue before you deduct any business expenses, allowances, or tax deductions. For example, if you make £55,000 in sales but have £15,000 in business expenses, your gross income is £55,000. Because this figure is over the threshold, you must register for MTD from April 2026.

Who qualifies for MTD self-employed?

The rules encompass a wide variety of independent workers. You qualify for MTD for Income Tax if you operate as a sole trader, freelancer, or independent contractor, provided your gross income hits the threshold.

If you have multiple sole trader businesses, you must add the gross income from all of them together. If the total combined gross income exceeds £50,000, you fall under the MTD rules for 2026.

There are a few rare exemptions. HMRC may grant an exemption if it is not practical for you to use digital tools. This might be due to age, disability, remote location with poor broadband, or religious beliefs that prevent the use of computers.

Does rental income mean I must register?

Yes, rental income absolutely counts towards the MTD threshold. If you are a private landlord, you operate much like a business in the eyes of HMRC.

You must calculate your total gross rental income. If you are both self-employed and a landlord, you have to add your gross self-employment income and your gross rental income together.

For instance, if you earn £30,000 gross from freelance consulting and £25,000 gross from renting out a property, your total qualifying income is £55,000. You will need to comply with MTD starting in April 2026, keeping digital records for both your business and your property income.

How to prepare and register for MTD

Transitioning to MTD requires a change in how you handle your daily administration. You can no longer rely on paper ledgers or basic spreadsheets unless those spreadsheets use specific bridging software to connect to HMRC.

How do I register?

Registering for MTD requires a few specific steps. Before you sign up, you must have MTD-compatible software in place.

1. Choose your software: Find an accounting software package recognised by HMRC for Making Tax Digital.
2. Organise your records: Ensure all your current income and expense records are up to date within that software.
3. Sign up through HMRC: Use your Government Gateway credentials to log in to the HMRC website and sign up for MTD for Income Tax.
4. Authorise the connection: Link your chosen accounting software to your HMRC account so the two systems can communicate.

By working with our team, we make your transition to MTD completely seamless. You won’t have to worry about choosing compatible software, organising your records, or registering through the HMRC portal—we handle it all for you.

Our team already have the right MTD-compliant software and will manage the entire registration process, including authorising the connection to HMRC on your behalf. We take the stress out of MTD, ensuring you are fully compliant and your records are correct from day one, so you can focus on running your business.

Who files the reports?

Under MTD, the reporting structure changes significantly. Instead of one tax return per year, you must submit quarterly updates of your income and expenses. At the end of the year, you submit an End of Period Statement (EOPS) and a Final Declaration to finalise your tax position.

Ultimately, the legal responsibility for these filings falls on you, the taxpayer. However, you do not have to do the actual filing yourself – that’s why we’re here. As your accountant, we’re able to review your digital records, ensure everything is coded correctly, and submit the quarterly updates and final declarations directly to HMRC for you.

How RHJ Accountants can help you

Navigating Making Tax Digital does not have to be a headache. At RHJ Accountants, we take the stress out of tax compliance so you can focus on running your business and managing your properties.

Here is exactly how we can help you transition to MTD smoothly:

Setting up and managing MTD

We already have the best MTD-compatible software for your specific needs. Our team will use this software to manage the entire process for you – if you’re already a client, we have all your records.

Filing your tax returns and updates

Forget about missing deadlines. We will handle all your quarterly submissions, ensuring your income and expenses are reported accurately. When the end of the tax year arrives, we will prepare and submit your Final Declaration, claiming all the appropriate reliefs and allowances to legally minimise your tax bill.

Expertise in multiple tax jurisdictions

Many of our clients do not just operate in the UK. If you are an expat, a digital nomad, or a business owner with interests overseas, your tax situation is vastly more complex. RHJ Accountants specialises in cross-border taxation.

If you were not a tax resident of the UK for the previous tax year, you may not need to file an SATR. However, it is better to always check. To assess your qualifying income, we’ll look at the Self Assessment tax return you submitted in the past and check your latest information. Your qualifying income will include:

• UK property income
• Self-employment income that you have declared in your previous UK SATR

If you have any income from dealing in or developing UK land, this will be included.

We help clients who operate in multiple tax jurisdictions stay compliant with HMRC while understanding their liabilities abroad. Whether you have overseas rental property or earn self-employment income from foreign clients, we ensure your MTD reports accurately reflect your global financial footprint while preventing double taxation.

Take the next step

Making Tax Digital represents a fundamental change in UK tax reporting. While 2026 might feel far away, adapting to digital record-keeping takes time. The sooner you implement the right software and processes, the easier the transition will be.

Do not wait until the deadline is looming. Reach out to RHJ Accountants today. We can assess your current income, determine exactly when MTD applies to you, and build a roadmap to get your finances fully digitised and compliant.