Firstly, don’t panic
If you’ve recently received a letter from HMRC telling you that you need to comply with Making Tax Digital (MTD), don’t panic. You’re not alone—and it’s easier to get started than you might think.
At Clear Books, we help sole traders and landlords across the UK get MTD-ready with simple, HMRC-recognised software. Here’s a quick guide to help you understand what the letter means and what steps you need to take.
What is MTD?
Making Tax Digital is a government initiative to modernise the UK tax system. It requires businesses and landlords to:
- Keep digital records
- Use compatible software to submit tax returns
- Submit tax information to HMRC more frequently and accurately
From April 2025, the self employed and landlords can get started on MTD now. And from April 2026, it will start to become mandatory.
Why Have I Received This Letter?
HMRC is contacting businesses that will need to use MTD-compliant software. If you’ve received a letter, it likely means:
- You’re in the income bracket that will be required to comply with MTD for ITSA
- HMRC is encouraging you to get ready early by joining the pilot scheme now
- They want to ensure you have enough time to prepare before the rules become mandatory
Joining the pilot now means you can get used to the system ahead of time—and avoid last-minute stress.
What Should I Do Next?
Here’s a step-by-step guide to help you stay compliant:
1. Check If MTD Applies to You
To be affected now (or soon), you will:
- Be a sole trader or landlord
- Have total annual income over £20,000
- Submit a Self Assessment tax return
You can check your income on your most recent tax return (SA302).
If your income is below £50,000, you don’t need to take action just yet—but it’s worth being aware of what’s coming, as individuals with income under £50,000 and later £30,000 will be impacted soon.
2. Sign Up for MTD with HMRC
You need to register for MTD through HMRC’s website. Don’t worry—this process only takes a few minutes. You’ll need:
- Your Government Gateway login
- Your National Insurance number
- Your business and/or property income details
💡 You can sign up for MTD from within Clear Books, or directly with HMRC.
3. Start Using MTD-Compatible Software
Under MTD, you must use software to:
- Keep digital records of income and expenses
- Send quarterly updates to HMRC from within the software
- Submit your year-end tax filing
💡 Our software at Clear Books is fully compatible with MTD for Income Tax. We’re HMRC-recognised software, and our tools make it easy to stay compliant without extra admin.
4. Keep Digital Records
From now on, you’ll need to keep digital records of your income and expense transactions. This can be done automatically if you’re using cloud accounting software like Clear Books.
Our software lets you:
- Record income and expenses in real time
- Snap and store receipts using your phone
- Automatically categorise transactions
Bonus: This not only helps you comply with MTD—it also gives you a clearer view of your finances all year round.
5. Get Ready for Quarterly Submissions
Once you’re set up, submitting your quarterly updates is quick and painless. Clear Books prepares your update for you, you just review the numbers, click submit, and your return goes straight to HMRC—no stress, no spreadsheets.
Our software guides you through each step and sends reminders so you never miss a deadline.
What Happens If I Don’t Act?
Right now, joining the MTD for ITSA pilot is optional—but it will become mandatory from April 2026 if you meet the income threshold.
Ignoring the change could lead to:
- Penalties for non-compliance
- Missed deadlines
- Last-minute stress when the rules kick in
Getting started early puts you in control—and Clear Books makes the transition simple.
Get MTD-Ready with Clear Books
Whether you’re a sole trader, freelancer, or landlord, we’re here to help you prepare for MTD for Income Tax.
✅ Get started for free
✅ Fully MTD-compliant
✅ Designed for small businesses and individuals
✅ Easy setup with UK-based support
Get started for free today and take the stress out of Making Tax Digital.
Clear Books – Simple accounting software for UK small businesses.
