Making Tax Digital: Your Quick & Easy Guide (No Faffing About!)

🧾 Making Tax Digital (MTD) – Summary of Everything 2025 Update

1️⃣ What’s changing

MTD for Income Tax Self Assessment (ITSA) is being phased in gradually.
The start date is now April 2026, but not everyone joins at once:

Anyone earning below £30,000 before 2027 will remain on the normal Self-Assessment return until their band enters the system.

2️⃣ What MTD actually means

Once you join MTD for ITSA you must:

1. Keep digital records of income and expenses (no more paper logs).

2. Use HMRC-approved software (like FreeAgent, Xero, or QuickBooks).

3. Submit quarterly updates of income and expenses.

4. Send an End-of-Period Statement (EOPS) for each business.

5. File a Final Declaration replacing your old Self-Assessment return.

The idea: smaller, more frequent submissions = fewer surprises at year-end.

3️⃣ How landlords fit in

• If you have property income only, you’ll join in the same year as self-employed people at your income level.

• Joint property owners will each report their share separately.

• Overseas landlords with UK property are included.

4️⃣ How to prepare now

1. Add up your gross income (trading + rental) for 2024/25 - that determines when you join.

2. Move to compatible software early; FreeAgent and Xero are ready.

3. Keep business and personal accounts separate.

4. Test quarterly reporting inside your software now - HMRC’s pilot is open.

5. Budget for agent help - most accountants will need extra time per client.

5️⃣ What’s not changing

• MTD for VAT is already mandatory for everyone over £90 k turnover and working fine.

• MTD for Corporation Tax is still years away - no pilot yet.

6️⃣ Common misconceptions

• ❌ “I’ll have to pay tax four times a year.” → You’ll report quarterly, but still pay annually.

• ❌ “Excel will be banned.” → It won’t, if you use bridging software that links spreadsheets to HMRC.

• ❌ “My accountant can just file as usual.” → They can, but they’ll need your data digitally, on time, every quarter.

7️⃣ Why this matters for 2025

Between MTD, Companies House ID checks, and payrolling benefits, 2026 – 2027 will be packed with deadlines.
Starting the digital move now saves stress later - and avoids losing your accountant’s slot during the rush.

8️⃣ Our take

For small businesses and landlords, this is less about technology and more about habit change.
Once you’re using proper software, quarterly updates are a few clicks.
We can help you check your turnover threshold, connect to HMRC, and set up FreeAgent so you’re ready before 2026.