Have you got the right software in place for Making Tax Digital for Income Tax?

Making Tax Digital (MTD) for Income Tax has finally arrived and many sole traders, landlords and self-employed individuals will need to comply with the new reporting rules.

Since 6 April 2026, those with gross income over £50,000 will need to use MTD-compatible software that submits their new digital reports to HMRC.

It can be hard to know which system you need to have in place and which is the right one for you.

However, you must understand the available options now so that you can remain compliant and avoid any unwanted errors or penalties.

What is Making Tax Digital for Income Tax?

MTD is the Government’s initiative to move the UK tax system fully online.

Under MTD for Income Tax, the annual Self-Assessment return will be replaced with a more frequent digital reporting process.

Instead of submitting one annual return, you will be required to keep digital records of income and expenses, submit quarterly updates and complete a final end-of-year declaration.

These submissions must be made using HMRC-recognised software and you must have the right system in place to remain compliant.

If you haven’t already put the steps in place to become compliant, it is important that you do so now. The first reporting deadline is 7 August 2026.

What software is needed to stay compliant?

HMRC does not provide its own software for MTD and you must use compatible software that can:

• Maintain digital records of income and expenses
• Submit quarterly updates directly to HMRC
• Complete the final declaration at the end of the tax year
• Ensure digital links between records

Full accounting software

We recommend Xero Accounting software for your MTD compliant software. This solution manages your bookkeeping, bank feeds, invoicing, expense tracking and MTD submissions all-in-one system.

It can also generate reports and forecasts that provide you with clarity on your finances and allow you to make informed business decisions.

Bridging software

If you prefer to continue using spreadsheets, bridging software connects your existing records to HMRC’s system so you can submit quarterly updates digitally.

This can be a practical short-term solution, particularly for landlords or smaller businesses with simple affairs.

You will need to assess software is right for you by looking at how you currently manage your records and how much automation you want.

What should you look for when choosing MTD software?

Choosing MTD software is about more than basic compliance. The right system should support how you run your business and reduce the administrative pressure on you.

You should consider:

• Income reporting – The software must support all relevant income streams, including self-employment, UK property and foreign property income where applicable.
• Direct HMRC integration – It should be fully MTD-compatible and allow for quarterly updates and a final declaration to be submitted directly to HMRC.
• Clear digital record-keeping – The system must maintain compliant digital records and ensure proper digital links between transactions and submissions.
• Ease of use – A straightforward dashboard and clear reporting system will make your day-to-day bookkeeping more manageable.
• Automation – Bank feeds, automatic transaction categorisation, VAT calculations and error alerts can all reduce manual input and improve accuracy.
• Scalability – The software should be capable of supporting business growth, additional income streams and future VAT registration.

How can we support your MTD for Income Tax requirements?

Landlords and self-employed individuals who fall into the first phase of MTD for Income Tax must act now to find the right software for them to ensure their compliance.

Our professional team can support you by reviewing your current bookkeeping setup and advising on the software best suited to you and your business.

Having the right software and professional support in place can help make MTD for Income Tax more manageable.

For further advice or support on your MTD for Income Tax requirements, contact our team today.