From April 2025, Xero will launch a new plan called Xero Simple, designed specifically to support sole traders and landlords facing the forthcoming requirements of Making Tax Digital for Income Tax (MTD for IT). Xero have said the new package is part of their commitment to providing tailored solutions for those affected by the new digital tax regulations.

What is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) is an HMRC initiative aimed at modernising the UK’s tax system by requiring businesses and individuals to use compatible software to maintain digital records and submit tax returns. While MTD for VAT has been in effect for several years, the next phase—MTD for ITSA—will apply to sole traders and landlords earning above certain income thresholds.

• From April 2026, those earning over £50,000 annually will need to comply with MTD for IT.
• From April 2027, the threshold lowers to £30,000, with further expansions expected later.

Key requirements include maintaining digital records, submitting quarterly updates to HMRC, and filing a Final Declaration annually.

What is Xero Simple?

Xero Simple will replace Xero Cashbook, and is a streamlined plan tailored for individuals with straightforward financial needs, such as sole traders and landlords. It aims to simplify compliance with MTD for IT while offering essential features at an accessible price point.

Key Features:

• Digital Record-Keeping: Maintain accurate records of income and expenses in compliance with MTD rules.
• Quarterly Reporting: Submit quarterly updates directly to HMRC through Xero’s HMRC-recognised software.
• Final Declaration Support: Prepare and file your Final Declaration with ease.
• User-Friendly Interface: Designed for individuals without extensive accounting knowledge.

Functionality within the package will include:

• Invoicing: Easily create and send professional invoices and quotes (10 per month)
• Data capture with Hubdoc: An app to effortlessly capture receipts
• Automatically import bank transactions: Connect directly to banks or import from downloads
• Reconciling and reporting: Automated bank reconciliation and powerful reports

Pricing

Xero Simple will be priced at £7+VAT per month, which Xero say will make it ‘an affordable option for sole traders and landlords who need a straightforward solution for managing their tax obligations’.

Why is Xero Simple Important?

Xero have said that the introduction of Xero Simple addresses a need among sole traders and landlords who may find existing software solutions too complex or costly. With MTD deadlines approaching, having an affordable and easy-to-use option is crucial.

For landlords, this plan complements tools like automated rent collection via GoCardless or property management integrations through apps like Landlord Studio. For sole traders, it simplifies tax compliance while helping them focus on running their businesses.

Practical steps to prepare for MTD for IT

If you’re a sole trader or landlord, here are some steps to take ahead of the April 2026 deadline:

1. Assess Your Income Threshold: Determine whether your annual income exceeds £50,000 (or £30,000 from April 2027). Remember that income from multiple sources—such as rental properties and side businesses—must be combined.
2. Choose Compatible Software: Ensure you’re using HMRC-recognised software like Xero that supports MTD compliance. Consider whether Xero Simple meets your needs.
3. Digitise Your Records: Start maintaining digital records of all income and expenses now to ease the transition.
4. Plan for Quarterly Submissions: Familiarise yourself with the process of sending quarterly updates to HMRC through your chosen software.

How we can help

New regulations like MTD for IT can be daunting, but if you’re unsure whether Xero Simple is right for you or need help preparing for these changes, we’re here to help!

Get in touch with us to talk about MTD for IT and the likely impact the new rules will have for you, or you can contact Xero directly for more details about their new plan and how it could simplify your tax submissions.