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The UK’s tax system is undergoing its biggest change in decades.

Making Tax Digital (MTD) is the government’s plan to move away from the traditional annual paper-based Self-Assessment and towards a modern, digital-first system.

If you are self-employed or a landlord, these changes will likely affect how you record and report your income to HMRC.
Aashvina Gami from ARAG Law takes a closer look.

Here is a breakdown of what to expect based on your income and what you should be doing right now to prepare.

The timeline: Who is affected and when?

The rollout of MTD for Income Tax Self-Assessment (ITSA) is phased based on your gross annual income (your total income before expenses).

Annual Income
Start Date
What You Must Do
Over £50,000 April 2026 You will be the first group required to use MTD.
Over £30,000 April 2027 You will join the scheme one year later.
Under £30,000 TBC The government is still reviewing how MTD will apply to those in this bracket.

Note: These thresholds apply to your total qualifying income. For example, if you earn £25,000 from a rental property and £30,000 from self-employment, your total income is £55,000, placing you in the first wave.

What Is actually changing?

Under the old system, most people filed one tax return per year. Under MTD, the process becomes a continuous cycle:

  • Digital Record Keeping

    You can no longer keep paper-only records. All business transactions must be stored digitally using compatible software or spreadsheets.

  • Quarterly updates

    Instead of one annual deadline, you will send a summary of your business income and expenses to HMRC every three months via your software.

  • End of Period Statement (EOPS)

    At the end of the tax year, you’ll finalise your business income.

  • Final Declaration

    You will bring together all other forms of income (like savings interest or dividends) to receive your final tax bill.

Three steps you should take now

Even if you aren't in the first wave starting in 2026, getting ahead of these changes will save you significant stress later.

1. Confirm Your Income Band
Review your gross income from the last two tax years. Remember, this is your total turnover, not your profit. Knowing which "wave" you fall into will determine how much time you have to prepare.

2. Move to Digital Records Today
If you currently use a paper diary or keep receipts in a shoebox, now is the time to stop. Start using a simple spreadsheet or, better yet, dedicated accounting software (like Xero, QuickBooks, or FreeAgent). Getting used to logging expenses on your phone or computer now will make the 2026 transition feel like a non-event.

3. Access Professional Support
MTD requires "compatible software" that can talk directly to HMRC’s systems.

  • Software Support

    Most major providers offer MTD-ready packages

  • Professional Advice

    Speak to an accountant to ensure your current record-keeping meets HMRC standards.

  • Technical Identifiers

    Ensure your business details are up to date. While Legal Entity Identifiers (LEIs) are primarily for companies involved in financial trading, ensuring your tax references (UTR) and digital IDs are verified is a crucial part of the MTD setup.