HMRC Self Assessment changes are on the way, and the Association of Chartered Certified Accountants (ACCA) has urged HMRC to rethink parts of its income tax plans, warning that the switch to Making Tax Digital for Income Tax could pile extra cost and admin onto sole traders and landlords who are least able to absorb it. If you file a Self Assessment tax return, the short answer is this: nothing changes overnight, but a big shift is coming in stages from April 2026, and the earlier you understand these Self Assessment changes, the cheaper and calmer the transition will be.
The professional body’s concern, reported by The Accountant Online, is not that Making Tax Digital is a bad idea in principle. It is that the timing, the thresholds and the requirement to use commercial software risk hitting the smallest businesses hardest. This article explains what is actually changing, who it affects and when, what software you will realistically need, and the practical steps to take now so you are not scrambling later.
What is actually changing with Self Assessment
The headline change is Making Tax Digital for Income Tax Self Assessment, usually shortened to MTD for ITSA. Instead of filing one annual tax return, affected sole traders and landlords will have to keep digital records and send HMRC quarterly updates through compatible software, followed by a final declaration after the tax year ends. In plain terms, one big yearly job becomes five smaller ones.
The rollout is staged by income level. Based on HMRC’s published plans on gov.uk, the timetable works roughly like this:
- April 2026: sole traders and landlords with qualifying income above £50,000 must comply.
- April 2027: the threshold drops to those above £30,000.
- April 2028: the government has said it intends to bring in those above £20,000.
“Qualifying income” means your combined gross income from self-employment and property before expenses, not your profit. That distinction catches people out. A sole trader turning over £55,000 but keeping £28,000 in profit is still in scope from April 2026, because the £50,000 test is on turnover, not take-home.
Why ACCA is pushing back
ACCA’s argument is about proportionality and readiness. The concerns commonly raised by accountancy bodies include the mandatory move to paid software, the cost and time of filing quarterly rather than annually, and whether HMRC’s systems and guidance are mature enough for a smooth launch. There is also a fairness point: someone earning £20,000 gross from a side business is a very different proposition to a limited company, yet the same digital obligations will eventually apply.
For a business owner, the takeaway is not to panic but to plan. Government digital projects tend to arrive later and messier than first announced, but they do arrive. Betting on indefinite delay is risky. Treating the dates above as firm, while watching for official updates, is the sensible middle ground.
What this means for a small business
If your income is comfortably below £20,000 and looks set to stay there, you are outside the current plans and can carry on filing your annual return as normal. If you are anywhere near the thresholds, three practical realities are worth absorbing now.
First, spreadsheets alone will not be enough unless you bolt on “bridging software” that connects them to HMRC. Second, quarterly filing means your bookkeeping has to be current all year, not reconstructed each January. Third, if you use an accountant, their fees may change, because quarterly work replaces one annual push. Many practices will move clients onto monthly bookkeeping packages rather than a single year-end bill.
This is a good moment to sanity-check the rest of your tax admin too. If your turnover is climbing, our guide to VAT registration and which scheme to choose is worth a read, as the VAT threshold and the MTD income thresholds are separate tests that can both bite in a growth year.
The software you will need, and what it costs
MTD for ITSA requires software that HMRC recognises. The good news is that the market is competitive and there are options well beyond the household names. The catch, as ACCA notes, is that most of these carry a monthly cost that annual paper filers never had to pay.
The familiar players are Xero, QuickBooks and Sage, all of which are building or have built MTD for ITSA support into their small business plans. But the names a sole trader might not have considered are often the better fit:
- FreeAgent is aimed squarely at freelancers, contractors and small landlords, and is free for NatWest, Royal Bank of Scotland and Mettle business account holders, which can wipe out the software cost entirely.
- Coconut is a lightweight app built specifically for sole traders and the self-employed, with a focus on simple income and expense tracking rather than full double-entry accounting.
- 123 Sheets offers bridging software for people who want to keep working in Excel or Google Sheets and simply file the required updates to HMRC.
- APARI is a smaller UK provider that has focused on MTD for ITSA compliance for the self-employed and landlords.
Prices move around and providers frequently run introductory discounts, so treat the figures below as a guide to shop against rather than fixed quotes. Always check current pricing and confirm the product is listed on HMRC’s compatible software page before you commit.
| Provider | Best suited to | Typical monthly cost | Worth knowing |
|---|---|---|---|
| FreeAgent | Freelancers, contractors, small landlords | From around £19, or free with an eligible bank account | Free route via NatWest, RBS or Mettle can remove the cost |
| QuickBooks | Sole traders wanting a full accounting suite | From around £10 on entry plans (often discounted) | Widely used, strong mobile app |
| Xero | Growing businesses that may add staff or VAT | From around £16 | Large app ecosystem and accountant familiarity |
| Coconut | Simple self-employed income and expenses | Lower-cost tiers aimed at sole traders | Focused on simplicity over full bookkeeping |
| 123 Sheets | Spreadsheet users wanting minimal change | Low-cost bridging fees | Lets you keep working in Excel or Sheets |
If you want a wider view of the tools worth shortlisting this year, our roundup of UK small business software every owner should consider in 2026 puts these accounting options alongside the other systems a growing firm tends to need.
A realistic example
Take Priya, a self-employed graphic designer in Bristol turning over £58,000 a year. From April 2026 she is in scope. Today she keeps receipts in a shoebox and pays an accountant £450 to file her annual return. Under MTD for ITSA she needs digital records and four quarterly updates plus a final declaration.
If she takes the FreeAgent free route through a NatWest business account, her software cost is nil, but she now has to keep her books current every quarter. She might do this herself in an hour a month, or pay her accountant a monthly fee to handle it. Either way, the shift is from one annual crunch to a steady drumbeat of small tasks. Priya’s smart move is to start using the software a full tax year early, so that when the rules bite she is simply carrying on rather than starting cold.
How this sits with other tax and HMRC changes
MTD for ITSA is not landing in isolation. HMRC has been tightening its focus across the board, from labour fraud checks in construction to renewed pressure on business rates that has drawn complaints from sectors such as the British beauty industry pushing for rates reform. The direction of travel is more digital, more frequent reporting and less tolerance for informal record keeping. Getting your books onto proper software now future-proofs you against more than just this one change.
Frequently asked questions
Do I have to comply if my income is under £50,000?
Not in April 2026. The first phase only covers those with qualifying income above £50,000. However, the threshold is planned to fall to £30,000 in April 2027 and £20,000 in April 2028, so many more sole traders and landlords will be drawn in over time. Check your gross income against each date.
Can I keep using spreadsheets?
Yes, but not on their own. You can continue working in Excel or Google Sheets provided you use HMRC-recognised bridging software, such as that offered by 123 Sheets, to submit the required quarterly updates. Pure manual spreadsheets with no digital link to HMRC will not meet the rules.
Will this increase my accountant’s fees?
It might change how you are billed. Quarterly filing replaces the single annual return, so many accountants will move to monthly or quarterly bookkeeping packages rather than one year-end fee. The total may not rise dramatically if your records are tidy, but the payment pattern will likely spread across the year.
Is this the same as MTD for VAT?
No, they are separate. Making Tax Digital for VAT is already in force for VAT-registered businesses. MTD for Income Tax Self Assessment is the new phase covering income tax for sole traders and landlords. You can be in scope for one, both or neither depending on your turnover and registration.
What if HMRC delays it again?
It is possible, as the timetable has already shifted more than once. But planning around a delay is a gamble. The safe approach is to get compliant-ready early, because good digital bookkeeping helps your business regardless of when the rules formally apply.
What to do next
- Work out your qualifying income. Add gross self-employment and property income and compare it to the £50,000, £30,000 and £20,000 thresholds to see which start date affects you.
- Choose and trial software now. Shortlist a recognised option such as FreeAgent, QuickBooks, Xero, Coconut or a bridging tool, and start using it a tax year early so the switch is painless. If you bank with NatWest, RBS or Mettle, check whether FreeAgent is free for you.
- Talk to your accountant early. Ask how they plan to handle quarterly filing and what it will cost, so there are no surprises in 2026.
- Follow the official updates. Keep an eye on the gov.uk MTD guidance and ACCA’s commentary via ACCA so you hear about any changes to dates or thresholds first.
