Making Tax Digital for Income Tax

MTD for Income Tax starts 6 April 2026 for the self-employed and landlords with £50k+ income. Plan early to stay compliant and avoid disruption.

MTD represents one of the most significant overhauls to the self-assessment regime since its introduction in 1997. This includes new requirements to keep digital records, using MTD-compatible software, and submitting quarterly updates of income and expenses to HMRC. It is crucial to use accounting software for compliance with MTD requirements.

From April 2026, self-employed individuals and landlords with annual qualifying business or property income over £50,000 will be required to comply with the MTD for Income Tax rules. Qualifying income includes gross income from self-employment and property before any tax allowances or expenses are deducted for the relevant tax year. VAT registered businesses must maintain digital tax records and use compatible software for submitting VAT returns.

The transition to digital record keeping for VAT returns is a key aspect of MTD compliance.

Digital Record Keeping and Quarterly Updates

This first rollout of MTD for Income Tax will require taxpayers to submit quarterly updates to HMRC, reporting their income and expenses. Sole traders and landlords with varying income levels will be impacted by these changes. The next stage following in April 2027 will extend the rules to those earning between £30,000 and £50,000, considering all income sources for MTD compliance. The first phase of MTD implementation began in April 2019 for VAT-registered businesses, marking a significant milestone in digital tax compliance. Taxpayers will need to finalise their tax positions through specific tax return processes. Notably, quarterly updates do not require businesses to make tax adjustments as they would in full tax returns. Choosing suitable software products is crucial for MTD compliance. A further expansion, announced during the Spring Statement 2025, will apply MTD obligations to those with income over £20,000 from April 2028, emphasising the need to submit quarterly updates and final declarations. The government is still considering the best approach for individuals earning below this lower threshold, highlighting the importance of using MTD-compatible software. The end of financial periods for submissions must be adhered to for accurate reporting.

HMRC is asking some eligible taxpayers to sign up to its MTD testing programme on GOV.UK. This provides an opportunity to get comfortable with the new process before it becomes mandatory. The benefits of using MTD for managing compliance are significant. Importantly, penalties for late submissions will not apply during the testing phase, emphasising the importance of keeping accurate information for MTD compliance.

This move follows the rollout of MTD for VAT, which according to an independent report prepared for HMRC has helped over two million businesses improve accuracy and reduce errors. The significance of April 2024 for MTD compliance cannot be overstated. Key dates like 1 April are crucial for MTD compliance, and the final declaration is an essential component of the process. Submitting reports within the tax year is critical, and understanding the complexities of taxes under MTD is vital. National Insurance contributions are integral to MTD compliance, and businesses must comply with MTD regulations. The tax return deadline of 31 January is important, and making early preparations for MTD is advisable. The expansion of MTD for VAT in April 2022 underscores the requirement for submitting updates to HMRC. Businesses are required to comply with MTD regulations, ensuring updates are submitted on time. Software compatibility must be updated to meet MTD requirements, and keeping detailed records of income and expenditure is essential. Signing up for MTD is crucial, and potential limitations may apply to free software options. HMRC's role in MTD compliance is significant, and transitioning to a digital tax system offers numerous benefits. An email address is required for signing up for MTD, and businesses must submit quarterly updates. All business income must be reported for MTD compliance, and MTD addresses the needs of smaller businesses. The digital for income tax requirements are a key aspect of MTD compliance.

Help and Support from HLWA

As the deadline approaches, it is important to start planning in order to ensure a smooth transition to the new way of reporting Income Tax.

When signing up for Making Tax Digital (MTD) for Income Tax as a self-employed person, having an email address is essential along with other details like business name and accounting type.

If you need any help, we are on hand to support you. Get in touch today.