Author: Phillips & Co Accountants, Chester
Date: 04 March, 2026
If you are a sole trader or a landlord, the way you report your income to HMRC is undergoing the biggest change in a generation. Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) officially launches in April 2026.
The days of handing your accountant a shoebox full of receipts once a year in January are officially over. Here is exactly what is changing, who is affected, and what you need to do right now to stay compliant and avoid HMRC penalties.
Who has to sign up for MTD in April 2026?
The rollout is happening in phases based on your total gross income (your turnover/total sales before any expenses are deducted, combined with any gross rental income).
From 6 April 2026: It is legally mandatory if your total qualifying gross income is over £50,000. HMRC determines this based on the income you reported on your 2024/25 tax return.
From April 2027: It becomes mandatory if your total qualifying gross income is over £30,000.
(Please note: If you trade exclusively through a Limited Company, you are currently exempt from these specific rules.)
What are the new rules? What do I actually have to do?
If you fall into the £50,000+ bracket for this April, the traditional annual tax return is being replaced by a much more frequent reporting system. You are now required to do three things:
1. Keep Digital Records You can no longer keep manual paper ledgers or use basic spreadsheets. By law, you must record all your business income and expenses digitally using HMRC-compatible software (such as Xero, QuickBooks, or FreeAgent).
2. Submit Quarterly Updates Instead of one annual return, you must send HMRC a summary of your income and expenses every three months directly through your software. These are not tax returns, and you don’t pay your tax quarterly—they are simply regular updates to keep HMRC informed of your trading performance.
3. Submit a Final Declaration At the end of the tax year, you (or your accountant) will submit a “Final Declaration.” This replaces the old Self-Assessment. It ties all your quarterly updates together, adds any personal income (like bank interest or dividends), claims your tax reliefs, and calculates your final tax bill.
When are the new deadlines?
Your quarterly updates must be submitted to HMRC by the following standard dates every year:
Quarter 1: 7 August
Quarter 2: 7 November
Quarter 3: 7 February
Quarter 4: 7 May
Final Declaration & Tax Payment: 31 January (The following year, just like the old system).
How Phillips & Co Accountants Can Help
We know this sounds like a lot of extra administrative work, but you don’t have to navigate it alone. As certified Xero partners, we specialise in getting Chester businesses fully MTD-compliant.
Whether you need us to set up your cloud software, train you on how to snap photos of your receipts from your phone, or completely take over the quarterly reporting for you via our fixed-fee Sole Trader Packages, we have you covered.
Don’t wait until you miss the first quarterly deadline.
Contact Phillips & Co Accountants today.
Keep More, Stress Less
Disclaimer
The information contained in this blog is for general guidance only. It does not constitute professional advice and should not be relied upon as such. Always seek tailored advice from a qualified accountant regarding your specific circumstances.