From paperwork to digital records: Navigating the transition to MTD for Income Tax
The traditional income tax return is coming to an end for many.
From April 2026, landlords, sole traders and self-employed individuals with qualifying income over £50,000 will move to Making Tax Digital for Income Tax (MTD) and begin reporting digitally.
Fraser Campbell, UK Head of Accounts and Business Advisory Services, is urging those affected to prepare now for the most significant change to the tax system since the introduction of self assessment in 1997.
What’s changing under MTD?
Under the new MTD regime, those in scope must:
- Keep digital financial records
- Use MTD-compatible software
- Submit quarterly updates instead of an annual return
- Provide a final declaration
This shift to real-time reporting will initially affect 864,000 landlords and self-employed individuals, increasing to 2.9 million within three years.
“The death of the traditional tax return”
Fraser describes this shift as a watershed moment:
“MTD truly signifies the death of the traditional tax return. With the deadline approaching, it is crucial that people prepare now to ensure a smooth, compliant transition.”
He highlights that MTD also brings benefits:
“For the first time, taxpayers will have access to real-time information about their tax position - supporting better forecasting, stronger tax planning and a smoother year-end process.”
Leading the way in MTD preparation
Azets is at the forefront of MTD readiness. In June, we became the first UK accountancy firm to submit a quarterly update for a landlord under MTD, working with HMRC and Xero during the testing phase.
With the largest cohort of MTD beta clients and more than 1,000 trained advisers, we have gathered significant insight through early adoption, enabling a seamless approach for clients preparing for the April rollout.
Fraser adds:
“Our technology-led approach with Xero’s best-in-class software ensures cost-effective, compliant solutions. Preparation and planning are essential.”
Top tips for preparing for MTD
1. Check whether you fall into scope
If your qualifying income exceeds £50,000 in the 2024-25 tax year, you will be required to comply with MTD from 6 April 2026.
2. Prepare early even if you're not yet in scope
The qualifying income thresholds will fall in future years:
- £30,000 from April 2027
- £20,000 from April 2028
If you are likely to fall into these bands, early preparation is beneficial.
3. Ensure your software is HMRC approved
You must use MTD compatible software. Adopting it now ensures a smooth transition.
4. Check for exemptions
Some individuals may qualify for MTD exemptions. Visit HMRC’s website or seek professional advice to confirm.
A new era of digital tax reporting
Nearly two million VAT-registered businesses are already using MTD for VAT. Extending MTD to Income Tax marks the next major stage in HMRC’s digital transformation.
For landlords, sole traders and the self-employed earning above £50,000, the shift begins this April, and preparation is key.
We’re here to help
Azets’ dedicated MTD team has developed a range of MTD for Income Tax packages to help you stay compliant, adopt the right software and transition confidently.
Contact us today to discuss the MTD package best suited to your needs.
