If you’re a sole trader or landlord with an annual turnover above £50,000, we hope that you’re aware that Making Tax Digital (MTD) for Income Tax Self Assessment is mandatory from April 2026. This means significant changes to how you keep records and submit your tax information to HMRC. In short, you must now use MTD-compatible software to keep your records and submit quarterly updates to HMRC. But don’t worry, we’ve created this straightforward checklist to help you get MTD-ready.

The Hour Hands essential MTD checklist for sole traders and property owners

✓ Check if you’re impacted by MTD

● Review your income: If your annual sole trader or property income exceeds £50,000, then you need to register and submit MTD returns from April 2026 onwards. This is your gross income that includes all business turnover before expenses, not just your profit.
● Mark it on your calendar: If you’re impacted, you must sign up to MTD by the deadline specified by HMRC. You can read more here.

✓ Choose MTD-compatible software

● Research HMRC-approved options: Only software on HMRC’s approved list is allowed but this includes popular brands such as Xero, QuickBooks, FreeAgent, and Sage.
● Consider your business needs: Choose software that handles everything you need it to do including invoicing, expenses, VAT (if applicable), and that it integrates with your bank accounts.
● Check the pricing structure: Costs vary and are likely to have monthly or annual subscription fees.
● Test before committing: Many providers offer free trials, so you can find the best fit for your working style. Give yourself time to research and evaluate the software.

✓ Set up your digital records

● Digitise your record-keeping: No more shoeboxes of receipts – you’ll need to record all income and expenses digitally.
● Link your bank accounts: Most MTD software can automatically import bank transactions, saving time.
● Create a filing system: Set up clear categories for different types of income and expenses within your software.
● Go paperless where possible: Use apps to photograph and store receipts digitally, linking them to transactions in your software.

✓ Create a quarterly process for MTD

● Know your submission dates: You’ll need to submit quarterly updates to HMRC showing your income and expenses for each quarter.
● Set calendar reminders: Quarterly deadlines come round quickly so we recommend that you set an alert at least two weeks before each due date and a day or two before each date too.
● Review your figures regularly: Don’t wait until the deadline to check your records. Regular reviews help you spot errors early and will also help you keep on top of your financial position.
● Keep copies of submissions: It’s a good idea to maintain a record of all updates submitted to HMRC for your own reference.

✓ Remember your end-of-year declaration

● Remember the final step: You’ll need to complete a final declaration and submit your self assessment tax return at the end of the financial year. This is in addition to the quarterly updates.
● Allow time to make year-end adjustments: You may need to make corrections or add information not included in your quarterly updates so don’t leave the declaration until the last minute.
● Calculate your tax liability: Your software should help you work out what tax you owe. Don’t forget to send this payment to HMRC!
● The Self Assessment deadline remains the same: 31st January is still the deadline for submitting your final tax return and payment.

✓ Stay compliant and avoid penalties

● Keep digital records for at least five years as required by HMRC.
● Submit all updates on time: Late submissions can lead to penalties that will start at £200 and increase if you continue to submit late.
● Ensure your figures are accurate: Careless mistakes or deliberate errors can also lead to penalties, which may be 15-100% of the tax due.
● Keep software updated: Software needs updating regularly, keep on top of this so you incorporate any HMRC updates.

✓ Get support and training

● Take advantage of tutorials, webinars, and the support function in your software.
● Join online communities such as groups and forums for practical advice.
● Attend HMRC webinars. These are often free guidance sessions about MTD requirements and how to comply.
● Don’t struggle alone. If you’re finding MTD overwhelming, professional help is available and often more affordable than you think.

✓ Consider outsourcing to a professional bookkeeper

Preparing, launching and remaining compliant with HMRC’s MTD requirements takes time and needs good attention to detail. Consider outsourcing your MTD for income tax and for VAT to our amazing Hour Hands bookkeepers and spend your time on growing your business and serving your customers rather than on compliance tasks. It makes excellent business sense.

Why outsource your MTD bookkeeping?

● Focus your precious time on growth. Bookkeeping typically takes sole traders 5-10 hours per month. Outsourcing frees you up to focus on what you do best – running your business.
● Ensure accuracy, compliance AND avoid penalties. As professional bookkeepers, we stay up-to-date with HMRC requirements and MTD changes, so you don’t have to. We’ll ensure your records are accurate and submissions are made on time, helping you avoid costly penalties.
● Gain financial insights. We don’t just handle the data, we’ll also provide regular reports showing you exactly where your business stands financially, helping you make better business decisions.
● No more late-nights panicking about quarterly deadlines or worrying whether you’ve categorised something correctly. We deliver peace of mind.
● Outsourcing is cost-effective. When you factor in software costs, training time, and the value of your own time, outsourcing often costs less than doing it yourself.
● We’re experts. As professional bookkeepers, we can answer your questions, spot potential issues before they become problems, and even liaise with your accountant at year-end.

Think of MTD as an opportunity not an extra task

With proper preparation and the right support, you can turn complying with MTD into an opportunity. Consider it a way to gain better control and understanding of your business finances each quarter.

Whether you choose to manage MTD yourself or partner with a professional bookkeeping service, the most important step is to start preparing now. Don’t wait until the deadline is looming, give yourself plenty of time to get comfortable with the new system.

If you’d like to explore working with us, please get in touch for a no-obligation chat about your MTD requirements and how we can support you. We’ll be your extra pair of hands with MTD and all your bookkeeping requirements.