Written by: Ffion Bainbridge – MTD specialist
What is Making Tax Digital for Income Tax?
MTD for Income Tax will be composed of three main elements;
Digital record keeping
Quarterly submissions to HMRC
A year-end report
Individuals will be required to keep online digital records which show detailed categorised business and/or rental income and expenditure. These will be submitted to HMRC each quarter.
At the year-end the quarterly reports will then be adjusted for tax purposes and, after bringing in other sources of income you may have received in the year i.e. savings interest, a report will be sent to HMRC to inform them of your tax position. This report will replace the old style self assessment tax return, but the January deadline will remain to be the same.
Who will be affected and when?
MTD for Income Tax will affect those who are self-employed or landlords, or both. It will be phased in with the starting date depending on your turnover, before expenses, across all self-employed and property businesses:
Turnover over £50,000 – 6 April 2026
Turnover between £30,000 and £50,000 – 6 April 2027
Your income level will be based on the previous tax year, so for the first wave of individuals it will be based on the earnings shown on your 2024/25 tax return. Although 2026 seems a long way away, it is fast approaching and getting yourself ahead of the game will benefit you in the long run.
Currently those earning under £30,000 will not be included in MTD for Income Tax and they will be required to continue to submit tax returns as normal. From April 2029/April 2023, it is likely that MTD for Income Tax will apply to businesses with turnover above £20,000.
No timetable has been specified yet for partnerships or limited companies as to when they will be brought in.
When will I pay my tax?
After each quarterly report HMRC will send a calculation of estimated tax liability. However, tax will not be payable at this point. Tax will remain to be payable by the usual January and July deadlines, following submission of the year-end report.
What will happen by 6 April 2026?
You will still need to submit your 2024/25 tax return as usual.
HMRC will review the return to check if your combined trading turnover is over £50,000.
HMRC will write to you to tell you that you must use Making Tax Digital for Income Tax starting from 6 April 2026.
We will help you by signing you up for Making Tax Digital for Income Tax and providing you with the services you need going forward.
Can I opt out of Making Tax Digital for Income Tax?
There are some conditions that will mean you can apply for an exemption. These mainly following the same exemption rules as MTD for VAT, which focus on the impracticality of using digital tools to keep business records – this may be due to reasons such as age, disability, location or for religious reasons. If you believe you could be exempt from Making Tax Digital for Income Tax due to any of the above, please get in touch.
Do I need to sign up if I’m signed up for VAT?
Making Tax Digital for Income Tax and MTD for VAT are separate schemes which operate independently. Although it may be likely that if you are signed up for one you would be signed up for both, each have different criteria which will be looked at separately and signed up for individually.
What are my software options?
HMRC have announced that they will not be providing any free software to assist with this transition, but they have released a list of Making Tax Digital for Income Tax compatible software.
We are currently in the process of looking into the best software packages, how these can benefit our clients and which we would recommend based on the specific needs of each client.
What can we do for you?
We are currently working on informing the first wave of client’s who are likely to be included in Making Tax Digital for Income Tax from 6 April 2026, and so if you are one of these people look out for our communication as we will be in touch.
Making Tax Digital for Income Tax may require a substantial change by some individuals in the move forward to modernising your businesses and record keeping. We advise that you see this as an opportunity to improve your business and streamline your admin.
We are here to answer any questions you may have about what this means for your business going forward, as well as help make this transition easier for you.
If you would like to know any more information about how this personally affects you and your business, or have any further questions, please get in touch with Ffion.
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