Making Tax Digital for Income Tax: a plain English guide for Brighton small businesses

By Accounting Solution · June 2026 · 7 min read

Making Tax Digital for Income Tax (MTD for IT) went live on 6 April 2026. It is the biggest change to UK personal tax reporting since Self Assessment was introduced in 1997 — and a significant number of Brighton small business owners and landlords are now legally required to comply.

This guide explains it plainly, without the jargon.

What is MTD for Income Tax?

Instead of filing one annual Self Assessment return, affected taxpayers now submit four quarterly updates to HMRC throughout the year, plus a final year-end declaration. The idea is to bring tax reporting closer to real time, making it easier for HMRC to spot errors and for taxpayers to manage what they owe.

Who does it affect?

You are required to comply if you are a sole trader or landlord with qualifying income above the relevant threshold. Qualifying income means your gross self-employment income plus any property rental income, before expenses.

• From April 2026: qualifying income over £50,000
• From April 2027: qualifying income over £30,000
• From April 2028: qualifying income over £20,000

Limited companies are not currently in scope. Partners in partnerships are also not yet affected, though HMRC has indicated this will change in future.

What do you actually need to do?

The process has three components. First, you keep digital records using MTD-compatible software — Xero, QuickBooks, FreeAgent, and Sage all qualify. Second, you submit quarterly updates to HMRC showing your income and expenses for each quarter. Third, you submit a final end-of-year declaration, which replaces your current Self Assessment return.

Your accountant can manage all of this on your behalf. At Accounting Solution, we set clients up on the right software, connect it to their bank accounts, and handle all submissions. You keep your receipts organised — we do everything else.

What happens if you miss a submission?

HMRC uses a points-based penalty system. Each missed or late quarterly update earns one penalty point. Once you accumulate four points, a £200 penalty is charged — and further penalties follow. The system resets if you maintain a clean compliance record for a full year.

What software should you use?

Xero and QuickBooks are the most widely used options and both integrate well with accounting services. For sole traders with simpler affairs, FreeAgent is a good choice — it is included free with some business bank accounts. We can advise on the right option for your situation.

I'm below the £50,000 threshold. Should I still prepare?

Yes, particularly if your income is growing or if you are likely to exceed £30,000 in the near future. Getting the right software and habits in place now makes the transition straightforward when your threshold arrives. Switching to digital record-keeping also tends to improve day-to-day financial visibility — most clients find it useful regardless of MTD.