In This Guide
- What Is Making Tax Digital for Income Tax?
- Who Is Affected — and When?
- What Does Quarterly Reporting Actually Mean?
- What Records Do You Need to Keep Digitally?
- Which Software Do You Need?
- What If You're a CIS Contractor?
- Exemptions — Who Doesn't Have to Use MTD?
- How to Prepare: A Step-by-Step Checklist
- How Accountaholics Can Help Hull Businesses
- Frequently Asked Questions
What Is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) is HMRC's programme to move the UK tax system online. The goal is to reduce the £9 billion tax gap caused by avoidable errors and to make tax administration more efficient for both HMRC and taxpayers. MTD for VAT has been mandatory since 2019. MTD for Income Tax Self Assessment (MTD for ITSA) is the next phase, starting from 6 April 2026.
Under MTD for Income Tax, sole traders and landlords within scope must keep digital records of their income and expenses using HMRC-approved software, and submit quarterly updates to HMRC throughout the year. The annual Self Assessment tax return is replaced by four quarterly updates, an End of Period Statement, and a Final Declaration — five submissions per year in total.
The key shift is from annual to real-time reporting. Rather than summarising a full year's activity in January, you report your income and expenses every three months. This gives HMRC — and you — a much more current picture of your tax position throughout the year.
Who Is Affected — and When?
MTD for Income Tax applies to you if you are a sole trader or landlord registered for Self Assessment, and your qualifying income — the combined gross total of your self-employment income and property income — exceeds the threshold for your tax year. The rollout is phased by income level:
| Start Date | Income Threshold | Estimated Affected |
|---|---|---|
| 6 April 2026 | Income over £50,000 | ~780,000 sole traders and landlords |
| 6 April 2027 | Income over £30,000 | ~970,000 sole traders and landlords |
| 6 April 2028 | Income over £20,000 | ~1.5 million sole traders and landlords |
Important: qualifying income is gross, not net
The threshold applies to your gross self-employment turnover and gross rental income before deducting expenses. If your turnover is £55,000 but your profit after expenses is £30,000, you are still within MTD's scope from April 2026.
Who Is Not Affected
MTD for Income Tax does not currently apply to limited companies (which are subject to Corporation Tax, not Income Tax), partnerships (a separate MTD phase is planned), employees with only PAYE income, or those whose qualifying income falls below the relevant threshold. If you are a company director with a salary and dividends only — and no separate self-employment income — you are not within scope.
What Does Quarterly Reporting Actually Mean?
Each quarter, you submit a summary of your business income and allowable expenses to HMRC through your MTD-compatible software. You are not submitting every invoice or receipt — just category totals. Think of it as a simplified profit and loss summary, sent four times a year instead of once.
The Four Quarterly Deadlines
The End-of-Year Submissions
After the four quarterly updates, you submit an End of Period Statement (EOPS) for each income source, confirming the full-year figures and claiming any annual adjustments or allowances. Finally, you submit a Final Declaration — the equivalent of the current Self Assessment return — confirming your total income from all sources. Both the EOPS and Final Declaration are due by 31 January following the end of the tax year, the same date as the current Self Assessment deadline.
What Records Do You Need to Keep Digitally?
HMRC requires you to keep digital records of each transaction — every sale, every purchase, every expense — in your MTD-compatible software. You must record the date, amount, and category of each transaction. You do not need to store digital copies of every receipt, but you must be able to produce them if HMRC asks.
Income to record
- Sales invoices and cash receipts
- CIS payments received
- Rental income received
- Any other self-employment income
Expenses to record
- Materials and stock
- Tools, equipment, and plant
- Vehicle and travel costs
- Subcontractor payments
- Professional fees and insurance
- Home office and phone costs
Which Software Do You Need?
You must use software from HMRC's approved list. Spreadsheets alone are not sufficient — you need either dedicated accounting software or a spreadsheet connected to HMRC via approved bridging software. The most widely used options for sole traders and contractors in Hull are:
| Software | Best For | Approx. Monthly Cost |
|---|---|---|
| QuickBooks Self Employed | Sole traders, CIS contractors | From £8/month |
| FreeAgent | Sole traders, freelancers | From £19/month |
| Xero | Growing businesses, landlords | From £16/month |
| Sage Accounting | Established businesses | From £15/month |
| Bridging software (e.g. TaxCalc) | Spreadsheet users | From £50/year |
Prices correct as of April 2026. We can advise on the right software for your specific situation and help you set it up correctly — contact us before committing to a subscription.
What If You're a CIS Contractor?
CIS (Construction Industry Scheme) contractors and subcontractors working in Hull and East Yorkshire are among the most commonly affected by MTD for Income Tax. If your gross CIS income — before the 20% or 30% deduction — exceeds the threshold, you are within scope.
The good news is that MTD does not change the underlying CIS rules. Your deductions are still offset against your income tax liability at year-end. What changes is the frequency of reporting: instead of one annual self assessment return, you submit four quarterly updates showing your CIS income and business expenses.
For CIS workers with variable income — which is most of them — quarterly reporting can actually be an advantage. It gives you a real-time view of your tax position and allows your accountant to flag any issues or opportunities before year-end. We manage CIS returns and MTD submissions together for many Hull construction workers, and the combination works well.
Exemptions — Who Doesn't Have to Use MTD?
HMRC grants exemptions from MTD for Income Tax in limited circumstances. You may qualify for an exemption if you are digitally excluded — meaning you genuinely cannot use digital tools due to age, disability, remoteness, or lack of internet access. Religious objection to using computers is also recognised. Insolvency proceedings may also qualify.
Exemptions are not automatic — you must apply to HMRC and explain your circumstances. Age alone is not sufficient grounds. If you believe you may qualify, speak to us before applying; we can help you assess whether an exemption is appropriate and, if so, how to present your case to HMRC.
How to Prepare: A Step-by-Step Checklist
If you are within MTD's scope, here is what you need to do. The earlier you start, the smoother the transition. Clients who prepare in advance avoid the last-minute scramble, software errors, and the risk of missed deadlines.
Check your qualifying income
Add your gross self-employment turnover and gross property income for the 2024/25 tax year. If the total exceeds £50,000, you must be MTD-compliant by 6 April 2026.
Choose HMRC-compatible software
Select software from HMRC's approved list — QuickBooks, Xero, FreeAgent, or Sage are the most common. We can recommend the right option for your business size and budget.
Start keeping digital records
Begin recording all income and expenses digitally in your chosen software. You do not need to wait until April 2026 — starting early means fewer errors and a smoother transition.
Register for MTD with HMRC
Sign up for MTD for Income Tax through your HMRC online account or ask your accountant to do this on your behalf. HMRC will write to you confirming your start date.
Submit quarterly updates
Every three months, submit a summary of your income and expenses to HMRC through your software. Your accountant can review and submit these on your behalf.
How Accountaholics Can Help Hull Businesses Prepare
We have been helping sole traders, contractors, and landlords across Hull and East Yorkshire manage their tax affairs for years. MTD for Income Tax is a significant change, but it is manageable with the right support. Here is what we offer:
Software Setup & Training
We help you choose and configure HMRC-approved software, and train you to use it confidently — or manage it entirely on your behalf.
Quarterly Submissions
We review your records and submit all four quarterly updates to HMRC accurately and on time, every quarter.
End-of-Year Declarations
We prepare and submit your End of Period Statement and Final Declaration, replacing your annual Self Assessment return.
Year-Round Tax Planning
Quarterly visibility means quarterly opportunities. We use your MTD data to identify tax savings before year-end, not after.
CIS + MTD Combined
We manage CIS returns and MTD submissions together — a natural combination for Hull's construction trades and contractors.
Fixed Monthly Fees
No surprise bills. Our MTD packages are priced transparently so you know exactly what you're paying each month.
Frequently Asked Questions
Ready to Get MTD-Ready?
Don't leave it to the last minute. Call us on 07715 627242 or email [email protected] for a free, no-obligation MTD readiness check.