HMRC is changing the way some sole traders and landlords need to report their income and expenses.
The changes will impact sole traders and landlords whose combined self-employment and property income exceeds £50,000 on their Self-Assessment Tax Return for the 2024/25 tax year – this threshold refers to income before expenses or tax deductions.
From April 2025, HMRC will write to customers whose 2023/24 Self-Assessment Tax Return shows their income from these sources was close to, or over, £50,000. This letter will confirm that, depending on their income in 2024/25, they may need to use Making Tax Digital for Income Tax.
What is Making Tax Digital?
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is a government initiative designed to modernise and simplify tax reporting for businesses and landlords.
Under MTD, sole traders, landlords, and businesses will be required to maintain digital records and submit quarterly updates to HMRC using approved software.
The rollout will be implemented in three phases, with the following thresholds referring to gross income, before any expenses or tax deductions:
- From April 2026, for those with gross income over £50,000
- From April 2027, for those with gross income over £30,000
- From April 2028, for those with gross income over £20,000
Why prepare now?
Although the mandatory start date is April 2026, you may already be preparing for the changes. HMRC is currently in discussions with all software providers and testing their systems to ensure the launch runs smoothly next year.
While the shift to digital reporting may feel daunting, particularly for those who have used the same systems for years, we know from experience that this transition offers significant long-term benefits. Digital tools enhance accuracy, improve accounting, and support cash flow planning, laying the groundwork for future business growth.
How Champion can support you
Your Champion adviser will guide you through the entire process, from selecting the most suitable software to configuring it alongside your current banking and payment platforms. Whether you require a single solution or a combination of platforms, we’ll help ensure a seamless transition without disrupting your day-to-day operations.
At Champion, we pride ourselves on staying at the forefront of digital innovation. Our dedicated Digital Council, comprising representatives from all four of our practices, actively researches and tests new products to ensure clients have access to the best solutions on the market.
We’ve helped businesses across a range of sectors make the digital shift, and we’re ready to help you too.
If you believe you may be affected by these new regulations, please contact your Champion adviser for tailored support.
For further information on MTD, visit: https://www.gov.uk/government/collections/making-tax-digital-for-income-tax-for-businesses-step-by-step
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