HMRC has updated its guidance on how to choose software for Making Tax Digital for Income Tax, and while that may sound like a niche admin change, it is exactly the kind of detail many small businesses and landlords need right now. From 6 April 2026, sole traders and landlords with qualifying income above £50,000 must start using compatible software, with lower thresholds following in later years. For anyone still relying on spreadsheets, a basic bookkeeping tool or a patchwork of manual processes, the latest guidance is a reminder that this is now a practical purchasing decision, not a distant policy debate.
The new HMRC page does not recommend one product over another, but it does spell out more clearly what the software actually needs to do. That includes keeping digital records for self-employment and property income, sending quarterly updates to HMRC and then handling the final tax return process. It also explains that some businesses may need more than one product, but only one product can be used for each separate submission stream. That matters for people juggling, for example, rental income alongside a trade.
Why this matters to smaller firms
For many micro-businesses, tax software has historically been something you buy once and then try not to think about again. Making Tax Digital for Income Tax changes that. The issue is no longer just whether software can store records or total up expenses. It has to support the whole reporting workflow that HMRC is introducing, and it has to fit the way the business actually operates.
HMRC’s separate eligibility guidance says the service becomes mandatory in phases, starting with sole traders and landlords whose qualifying income for the 2024 to 2025 tax year was above £50,000. HMRC also says it will look at self-employment and property income together when working out whether someone crosses the threshold. That means some people who do not think of themselves as particularly large operators may still be pulled into the first wave if they have more than one income stream.
The practical risk for SMEs is choosing a tool that looks cheap or familiar but cannot handle everything needed later. HMRC now says businesses should check whether software supports all relevant income sources, works with their accounting period and can also deal with the final tax return. If a business is VAT-registered, it should also check whether its existing VAT software can cover the new income tax requirements or whether another setup is needed.
The choice is wider, but so is the need to check the fine print
One useful part of the updated guidance is the distinction between software that creates digital records and software that connects to records already held elsewhere, such as spreadsheets. That could help smaller operators who do not want to rip out their entire current system straight away. But it also creates a trap. Bridging software may be enough for some users, yet others will need a fuller product that can manage quarterly updates, final submissions and any extra income reporting in one place.
HMRC also highlights budget, multiple-agent access and built-in error-checking tools such as HMRC Assist as points worth comparing before signing up. In other words, the cheapest option may not be the most practical if it creates more manual checking later.
For businesses still getting ready, our earlier guide on what UK small businesses should do now for Making Tax Digital for Income Tax covers the wider change. This latest update is more specific, but it reinforces the same message, preparation matters more than last-minute compliance.
What small businesses should do now
First, check whether you are likely to fall into the April 2026 start group based on your latest qualifying self-employment and property income. Second, review whether your current accounting or tax software genuinely supports quarterly updates and the final tax return process, rather than assuming an upgrade will appear automatically. Third, if you use separate systems for bookkeeping, VAT and tax submissions, test whether they will work together before your deadline gets close.
If you use an accountant or tax agent, now is a good time to ask a very direct question, should we keep our current setup, add bridging software, or move to a different platform altogether? That conversation is likely to be cheaper and calmer now than in the weeks before a filing deadline.
The takeaway
HMRC’s latest software guidance is useful because it turns a vague compliance project into a more concrete checklist. For sole traders, landlords and smaller firms that support them, the real lesson is simple, do not choose MTD software on brand recognition alone. Choose it on whether it will handle your actual income mix, submission needs and reporting workflow when the rules go live.
Sources
- HMRC, Choose the right software for Making Tax Digital for Income Tax, updated 17 April 2026
- HMRC, Find out if and when you need to use Making Tax Digital for Income Tax, updated 26 March 2026
- HMRC campaign site, Get ready for Making Tax Digital for Income Tax
