As a community of creative small-business owners, sole traders, and event professionals, many NABAS members manage their own accounts and submit annual Self Assessment tax returns. With the UK Government continuing its roll-out of Making Tax Digital for Income Tax (MTD ITSA), it’s important to understand when you’ll need to move to the new system — and whether the rules apply to you yet.

Below is a breakdown of the latest update from HMRC (September 2025) to help you plan ahead and stay compliant.

 

What is Making Tax Digital for Income Tax?

Making Tax Digital is HMRC’s long-term plan to modernise the UK’s tax system. Under MTD for Income Tax, affected taxpayers must:

• keep digital records of their business income and expenses


• use compatible software to send quarterly updates to HMRC


• submit an End of Period Statement and a Final Declaration instead of the current annual tax return

This means the traditional once-a-year Self Assessment process will eventually be replaced for many self-employed people.

 

Who Will Need to Use MTD for Income Tax?

You will need to use MTD ITSA if all of the following apply:

✔ You’re a sole trader and/or landlord registered for Self Assessment
✔ You receive income from self-employment, property, or both
✔ Your qualifying income exceeds £20,000

Qualifying income is the total of your self-employment and/or property income before expenses. HMRC checks this amount each year using your tax return.

When You Must Start Using MTD for Income Tax

The start date depends on your income level for a given tax year:

• Over £50,000 qualifying income in the 2024–25 tax year → Start 6 April 2026


• Over £30,000 qualifying income in the 2025–26 tax year → Start 6 April 2027


• Over £20,000 qualifying income in 2026–27 → The Government plans to legislate to extend MTD to this level (date to be confirmed)

If your income falls below £20,000, you won’t be required to use MTD for now.

Important: You only need to start after you’ve submitted your Self Assessment return for the relevant year — but you can sign up early if you prefer.

 

Who Is Exempt from MTD for Income Tax?

Some people will not need to use the system. Exemptions apply if:

1. Your qualifying income is £20,000 or less

You remain on the standard Self Assessment system unless the threshold changes in future.

2. You are “digitally excluded”

This applies if you cannot reasonably use digital tools due to:

• age


• disability


• poor internet access


• or other practical limitations

You can apply for an exemption if this applies to you.

3. You fall into specific categories that are automatically exempt

You are automatically excluded and cannot sign up if you are:

• a trustee (including charitable trustees)


• a personal representative of someone who has died


• a Lloyd’s member in relation to underwriting


• a person without a National Insurance number at the required date


• a non-resident company

If you are automatically exempt, you do not need to do anything.

Partnerships will also join MTD in future, but HMRC has not yet provided a timeline.

 

How to Check Whether You Need to Use MTD

HMRC has a tool to help you check:

• whether MTD applies to you


• when your start date would be


• what income counts toward your threshold

You can also use the checker on behalf of someone else, such as a family member or client.

Before using the tool, gather:

• your estimated self-employment and/or property income for the tax years ending 5 April 2025 and 5 April 2026


• confirmation of whether you are required to file a Self Assessment return

If you have foreign income, HMRC’s guidance helps you calculate how this fits into your qualifying income.

 

What Happens Before Your Start Date?

Each year, HMRC will:

1. Review your submitted tax return


2. Check your qualifying income


3. Send you a letter if you are required to begin MTD from the next tax year

However, and this is important, even if you don’t receive a letter, you are still responsible for checking your own status. If you believe you should be in MTD but haven’t heard from HMRC, you should:

• use HMRC’s checker


• speak to your accountant or tax agent


• ask a trusted contact who helps with your finances

If You Need to Use MTD: What to Do Next

If MTD applies to you, you’ll need to prepare before your start date. That includes:

1. Choosing compatible software

There are many accounting apps suitable for small creative businesses — some low-cost or free. HMRC provides a list of approved software options.

2. Getting familiar with digital record keeping

This may mean:

• logging income and expenses digitally


• using a mobile app to store receipts


• updating records more regularly than once a year

3. Authorising your accountant or agent (if you use one)

Your agent can send quarterly updates for you, provided you grant permission within the software.

4. Signing up for the service

You can sign up yourself or through your accountant.

What This Means for NABAS Members

Many balloon artists and decorators are sole traders with fluctuating annual income, so your requirement to join MTD will depend on your qualifying income in the relevant tax years.

You may need to act if:

• you consistently earn over £50,000 from your balloon business (or a combination of your business and property income), OR


• your income is between £30,000–£50,000 and rising

Even if you don’t meet the threshold yet, it’s wise to:

• start exploring digital accounting tools


• keep clearer digital records


• get comfortable with quarterly updates

This will make the transition much smoother when your time comes.

Making Tax Digital for Income Tax is one of the biggest changes to UK tax reporting in decades. While the staged roll-out aims to give small businesses time to prepare, it’s important to:

✔ Know your income category
✔ Check your start date
✔ Choose suitable software early
✔ Stay informed as HMRC releases further guidance

NABAS will continue to share updates to help members stay compliant and confident as these changes take effect.