Reporting income and expenses to HMRC for retailers | Making Tax Digital (MTD)

Starting 6 April 2026, some sole traders and landlords with sufficient annual income from self-employment and property will need to use compatible software to report income and expenses to HMRC under Making Tax Digital (MTD) for Income Tax.

Making Tax Digital (MTD) for Income Tax is a new way for sole traders and landlords to report their income and expenses to HMRC using compatible software. Starting 6 April 2026, some individuals will be required to follow MTD rules, depending on their total annual income from self-employment and property.

What You'll Need to Do

Under MTD for Income Tax, you’ll need to use HMRC-compatible software to:

• Maintain digital records of income and expenses
• Send quarterly updates to HMRC
• Submit a final declaration and pay any tax due by 31 January following the end of the tax year

By keeping digital records throughout the year, you’ll improve the accuracy of your tax reporting and reduce errors, supporting better financial decision-making and business growth.

Who Will Be Affected and When

MTD for Income Tax is being introduced gradually:

• From April 2026: Applies to sole traders and landlords with income over £50,000
• From April 2027: Threshold lowers to £30,000
• From April 2028: Threshold lowers further to £20,000

Benefits of MTD

Adopting MTD offers several advantages:

• Fewer Errors: Digital records reduce the risk of mistakes and make error correction simpler
• Time Savings: Automating processes saves time for you and your accountant
• Improved Budgeting: Regular updates give better visibility of tax liabilities
• Simplified Tax Returns: Categorised data streamlines your end-of-year tax filing

Getting Ready

HMRC is running a voluntary testing programme to help businesses and agents get used to MTD before it becomes mandatory.

To prepare:

• Read HMRC’s step-by-step guide to MTD for Income Tax
• Watch official videos and webinars on GOV.UK