Making Tax Digital (MTD) for Income Tax

by | May 20, 2025 | Making Tax Digital, Self Employed, Tax

Making Tax Digital (MTD) for Income Tax is set to begin on 6 April 2026. It will replace the traditional Self-Assessment Tax Return system for self-employed individuals and landlords. The aim is to improve record-keeping and reduce errors by requiring regular updates to HMRC instead of just an annual self-assessment tax return.

Who is Affected?

  • From April 2026, self-employed individuals and landlords with income over £50,000 must comply.
  • From April 2027, the threshold lowers to £30,000.
  • By 2029, (date yet to be confirmed) the rules will apply to those with income above £20,000.
  • Partnerships will join at a later, date yet-to-be-announced.

HMRC will advise individuals after January 2026 if they are required to join MTD for Income Tax. Your eligibility will be based on your tax return for the year ended 5 April 2025. 

What It Involves:

  1. Digital Records: Affected individuals must use compatible accounting software to maintain digital records.
  2. Quarterly Updates: Every three months, those affected will need to submit summaries of income and expenses. These updates will be due by the 7th of the month following each quarter. Penalties will be issued if the updates are not submitted on time.
  3. Year-End Declaration: After the year end, a final declaration will summarize the quarterly updates and allow for necessary tax adjustments. The deadline matches that of the existing self-assessment tax return and will be due by 31 January following the end of the tax year.

Exemptions & Testing:

  • People can apply for exemptions if they face challenges with digital reporting (e.g., age, disability). If you are exempt for MTD for VAT, this will carry over to MTD for Income Tax.
  • A public testing phase will be available in 2025/26, with no penalties during this time for those who participate. If you would like to check if you are eligible, you can do this on the GOV.UK website, or we can do it for you.

If you have any queries or would like more information please do not hesitate to contact us. We can advise on appropriate software packages to assist in preparing for MTD for Income Tax and can provide training and support to ensure you are ready for the transition.