As part of the government’s wider digital strategy, Making Tax Digital (MTD) is transforming how individuals and businesses manage and report their income tax affairs. From 1 April 2026, if you are a landlord, self-employed individual, or run a small sole trader business, these changes are likely to affect you.
What is Making Tax Digital for Income Tax?
MTD for Income Tax, officially known as Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), is a government initiative requiring taxpayers to keep digital records and use compatible software to submit updates to HMRC throughout the year, rather than only filing one Self Assessment tax return annually.
Who Will Be Affected?
MTD for Income Tax will apply to individuals who:
• Are self-employed and/or receive income from property rental, and
• Total gross income (turnover) exceeds £50,000 per year from these sources combined. The threshold will then reduce to £30,000 from April 2027.
Please note, at present there have been no announcements as to when partnerships and Trusts will be required to be MTD compliant.
Individuals who are impacted will be required to:
• Maintain digital accounting records in a software product or spreadsheet. Maintaining paper records will no longer meet the legislative requirements. The requirement to keep digital records will not mean you have to scan and store invoices and receipts digitally, you can continue to keep documents in paper form if they prefer, but each individual transaction (not summaries) must be recorded and stored digitally; and
• Submit quarterly updates to HMRC. The submissions must be made using a “functional compatible software product” that can access HMRC’s application program interfaces (API) platform.
Quarterly updates will be required for standard quarters, irrespective of a business’s accounting period.
The standard quarters are:
• 6 April to 5 July
• 6 July to 5 October
• 6 October to 5 January
• 6 January to 5 April
Businesses will be able to elect to report for calendar quarters:
• 1 April to 30 June
• 1 July to 30 September
• 1 October to 31 December
• 1 January to 31 March
The deadlines for quarterly updates will be 7 August, 7 November, 7 February and 7 May following the end of the relevant quarter (so those that elect for calendar quarters get an extra five days).
After the fourth quarterly update has been submitted and is final, the year-end tax return can be completed in the usual way.
What You Need to Do:
If you already keep your records digitally, there will be a platform available to submit the quarterly returns directly through your chosen software.
Software providers will keep you updated with the changes as a large amount of providers are currently going through rigorous testing to ensure they are compliant from 1 April 2026.
If you don’t keep your records digitally, to ensure compliance with MTD for Income Tax, we recommend that you:
1. Review your records: Start gathering and organising your income and expense information in a digital format if you haven’t done so already.
2. Choose suitable software: We can assist you in selecting the best MTD-compliant software for your needs. Please feel free to contact us and we can discuss the options available and help assist with the transition.
3. Stay ahead of deadlines: The new system comes with specific deadlines, and timely submission of your tax information will be crucial to avoid penalties.
We understand that these changes may feel overwhelming, but we are here to help you navigate the transition. We have contacted all clients who we believe are impacted based on 23/24 tax information. However, if your circumstances have changed in the last twelve months or you expect these to change in the next twelve months, please don’t hesitate to get in touch.