It’s 2025! 4 things you need to know about making tax digital (mtd)

It’s 2025! 4 Things You Need to Know About Making Tax Digital (MTD)

September 30, 2025

Background
We at Sakura are closely following and monitoring the updates on the upcoming change in 2026 under making tax digital (MTD) for income tax.

This issue will be a big game changer for self assessment tax payers and will require some support and guidance from us on the back of these changes.

Making Tax Digital (MTD) is transforming how individuals and businesses in the UK manage their tax affairs. NOW Whether you’re a sole trader, landlord, or accountant, understanding MTD is essential as HMRC continues its digital overhaul.

Here are four key things you need to know (NOW IN 2025)

1️⃣ MTD for Income Tax Starts in April 2026
The next phase of MTD — covering Income Tax Self Assessment (ITSA) — will apply from April 2026. Therefore if you’re a sole trader generating self-employment income, or A landlord and you are earning over £50,000 annually, you’ll be required to:

  • Keep digital records
  • Use HMRC-recognised software
  • Submit quarterly updates (essentially mini tax returns) to HMRC
  • File a final declaration by 31 January each year (with 31 st January 2027 the first deadline) 
  • Those earning between £30,000 and £50,000 will be included from April 2027 

2️⃣ Quarterly Reporting will replace the existing ‘one off’ annual self assessment tax return
Instead of submitting one self assessment tax return at the end of the year, MTD now requires you to:

  • Record income and expenses digitally Send quarterly summaries to HMRC
  • Submit a final end-of-year adjustment RETURN This change means you will need to record your activity throughout the tax year – and not just when the annual tax return is required.

3️⃣ You’ll Need Compatible Software
To comply with MTD, you must use HMRC-approved software. This software will:

  • Record transactions
  • Categorise income and expenses
  • Enable the updates to be submitted directly to HMRC

    The most familiar software providers such as Xero and QuickBooks are already MTD compliant.

4️⃣ MTD Is About Accuracy and Efficiency
From the perspective of HMRC, MTD isn’t just about going digital — it’s about improving the accuracy of tax reporting.
Benefits are likely to include:

  • Fewer mistakes due to automation
  • Real-time visibility of tax liabilities (by HMRC and the taxpayer)

From our perspective it will reduce most of the post April and/or ‘last minute’ gathering of information for the self assessment tax return, but will likely to higher fees for the 4 x times more HMRC submissions . . .

Final Thoughts
MTD is the biggest change to UK tax reporting in decades. Preparing now by choosing the right software and understanding the new process will help you stay compliant and avoid last-minute stress – in April 2026 !

Sakura can help you with guidance and support on the upcoming changes so that they are managed as smoothly as possible.

To find out more about how we can support you through these changes and how we can check whether you will be required to comply with the changes from April 2026, then take the Next Step and book a call!