November 2025 MTD Updates
- Thowsif Mukit
- Dec 8, 2025
- 3 min read
Making Tax Digital (MTD) is approaching its next major phase. From April 2026 many sole traders and landlords will begin using digital record keeping and submitting quarterly updates to HMRC. This marks one of the most significant changes to the tax system in recent years. Updated guidance released this autumn provides clearer detail on deadlines and the type of digital records required.
By late November taxpayers are starting to consider how these rules will shape their work in the new year. Many already use bookkeeping software, but Making Tax Digital introduces strict requirements about how records are kept and how information is transferred to HMRC. This means early preparation is essential.
MTD Updates
The MTD Update confirms that the first phase of Making Tax Digital for Income Tax will begin in April 2026. This will apply to individuals with annual business or property income above fifty thousand pounds. The second phase will begin in April 2027 for individuals with income between thirty thousand and fifty thousand pounds. These thresholds provide a phased approach and allow taxpayers to prepare gradually.
HMRC has expanded the Making Tax Digital pilot scheme. More taxpayers can now join even if they have additional income sources or more complex tax circumstances. The pilot is designed to test software compatibility and allow taxpayers to practise digital reporting before the rules become mandatory. This wider access marks a shift towards a stronger testing environment before full rollout.
New guidance also clarifies what digital record keeping involves. Every business transaction must be recorded digitally. This includes income, expenses and property related costs. The digital software must retain these records and must be able to send quarterly updates to HMRC without the need for manual entry. This requirement aims to reduce errors and create a clear audit trail for each taxpayer.
HMRC has also published a revised list of software products that meet the Making Tax Digital requirements. Taxpayers are encouraged to review this list and choose a product that is suitable for their business size and complexity. Early selection means there is more time to learn the system and avoid difficulties when quarterly reporting begins.
How it impacts you
For sole traders these changes affect how the business operates day to day. Digital record keeping will require information to be updated more consistently. This promotes better financial awareness and helps individuals understand their tax position long before the end of the tax year. It also reduces errors that often arise when records are updated only once a year.
Landlords will also experience a shift. Under Making Tax Digital a separate digital record must be kept for each property. This means rental income, repairs, maintenance costs and letting fees must be recorded clearly for each individual property. Landlords with several properties will benefit from software that can organise information in a structured and reliable way.
Company directors who file Self Assessment returns will also be brought into the system if they have property income or self employment income that exceeds the thresholds. Although company income is not within the scope of MTD for Income Tax, any personal income streams will be affected.
Those who join the pilot early will gain practical experience with quarterly reporting. This reduces uncertainty and provides a chance to correct processes before the rules become mandatory. The pilot also allows taxpayers to check whether their software, record keeping and bank feeds perform correctly.
What you can do
Start by reviewing your current bookkeeping method. If you use spreadsheets or paper records it is sensible to begin exploring software. A digital system will become essential for compliance. Choosing software early ensures you can move at your own pace rather than rushing closer to the deadline.
Next, review whether you are eligible for the Making Tax Digital pilot. Joining the pilot is voluntary, but it gives valuable experience and helps reduce pressure when the rules take effect. It also reveals whether your record keeping processes need updating.
Begin recording transactions digitally even if you are not yet required to submit quarterly updates. This builds good habits and helps you identify gaps or areas where information is inconsistent. Digital records also provide clearer insights into cashflow and performance throughout the year.
Speak with your accountant about how Making Tax Digital affects you. They can help you choose software, import data, set up categories and create routines for digital record keeping. Early preparation is the best approach for a smooth transition.
Ledgr Accountants provides guidance and support for clients preparing for Making Tax Digital. We help clients select software, test digital submissions and set up reliable processes that meet HMRC requirements.
Thowsif Mukit
Commercial Manager
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