Making Tax Digital sounds complicated. It doesn’t have to be.
If you’ve heard people talking about Making Tax Digital, you might be wondering what it actually means for you.
The name sounds technical, but the idea is quite simple.
It’s a new way of keeping your business records and sharing information with HMRC. If you’re a sole trader, it could soon become part of the way you manage your business.
What is Making Tax Digital?
Making Tax Digital, often called MTD, is HMRC’s new system for Income Tax.
Instead of keeping records on paper or in spreadsheets before completing one Self Assessment tax return each year, you’ll keep digital records using approved software.
You’ll send updates to HMRC during the tax year before completing a final declaration after the tax year ends.
It doesn’t mean paying tax more often. It simply changes how information is recorded and sent to HMRC.
Who needs to use it?
Making Tax Digital is being introduced in stages.
From 6 April 2026
If your qualifying income from self-employment and property was more than £50,000 in the 2024/25 tax year, you’ll need to follow the Making Tax Digital rules.
From 6 April 2027
If your qualifying income was more than £30,000 in the 2025/26 tax year, you’ll join Making Tax Digital.
From 6 April 2028
If your qualifying income is £20,000 or more in the 2026/27 tax year, you’ll also need to join.
Qualifying income means your total income from self-employment and property before expenses are deducted. It isn’t your profit.
If you’re unsure whether you’ll be affected, now is a good time to check. Preparing early gives you plenty of time to get comfortable before the rules apply.
Will I still complete a tax return?
Yes.
You’ll still confirm your income and tax position each year.
The difference is that you’ll already have shared information with HMRC during the year, so there’s much less to prepare when everything is finalised.
Many sole traders find it easier because the work is spread across the year instead of building up towards January.
Do I need accounting software?
Yes.
If you’re required to use Making Tax Digital, you’ll need software that works with HMRC’s system.
Many software packages can connect to your business bank account, organise your transactions and keep your records up to date.
The software keeps everything in one place, making it much easier to stay organised.
What if I’m not affected yet?
There’s no reason to wait.
Starting with digital bookkeeping now gives you time to build good habits without working towards a deadline.
When Making Tax Digital eventually applies to your business, you’ll already be working the right way.
How Brease helps
Every Brease client uses Making Tax Digital compatible software from the beginning.
Even if you don’t need to join MTD today, you’ll already be keeping your records in the way HMRC expects.
When your business reaches the threshold, there won’t be a major change to make. You’ll already be there, and we’ll be with you every step of the way.
Ready to make it simple?
Making Tax Digital doesn’t have to feel like another thing on your to do list.
With the right software and the right support, it becomes part of running your business.
If you’re wondering whether MTD applies to you, or you’d like to get ahead before the rules change, we’re here to help.
Looking for more simple business advice?
This guide is part of the Brease Guides collection, created to help sole traders understand bookkeeping, tax and Making Tax Digital without the jargon.
