HMRC letters – what to expect and how to prepare for Making Tax Digital

With less than one tax year remaining until Making Tax Digital (MTD) is enforced on 6 April 2026, it’s time to get ready for a new era of digital tax reporting. This change will impact sole traders and landlords with a gross income exceeding £50,000 for the 2024/25 tax year, before the deduction of any expenses or taxes.

Starting from April 2025, HMRC will send letters to individuals whose qualifying income sources were close to or over £50,000 based on their 2023/24 self-assessment tax return data. These letters will inform them that they need to comply with MTD ITSA if they are expected to continue trading at this level for the 2024/25 tax year.

Don’t worry if you receive a letter—there is plenty of help and support available. Here are some steps you can take now to ensure a smooth transition:

• Digital Records: Use a compatible software for digital record-keeping, ready for when you will need to send quarterly updates to HMRC.
• Separate Bank Accounts: Set up separate accounts for business and personal finances to simplify tracking and compliance. For guidance, please see a link to our recent article here.

Instead of resisting the change, it’s important to embrace it and make it work for you. Here’s how technology can benefit your business as well as preparing for MTD: 

• Software Packages: Off-the-shelf software for recording, storing, and reporting business or property data can reduce paperwork and help manage your business more effectively. They can also help with: 
• On-Site Payments: Technology that allows you to take payments from customers on-site can help your cashflow. 
• Recording transactions: Systems are available to simplify recording invoices or bank transactions. Cloud based access means you no longer need to drop off records to your accountant. 
• Debt Management: Tools for chasing debts and managing reminders can streamline these processes.

You don’t have to navigate this alone. Please get in touch if you have questions about choosing appropriate software or figuring out where to start.