Making Tax Digital for Income Tax: what’s changing and when

Making Tax Digital (MTD) is HMRC’s shift to digital record keeping and more frequent reporting. If you’re self employed or a landlord, a significant change is now underway, here’s what you need to know.

What MTD is, and why

MTD requires you to keep your records digitally and to report to HMRC using compatible software rather than typing figures into an online form once a year. HMRC’s aim is fewer errors and a more real time picture of tax. For you, it means a change in how and how often you report, not necessarily how much tax you pay.

MTD for VAT, already here

Since April 2022, all VAT registered businesses have had to keep digital records and file VAT returns through compatible software. If you’re VAT registered, this already applies to you and is now business as usual.

MTD for Income Tax, now starting

This is the big one. From 6 April 2026, sole traders and landlords with qualifying income over £50,000 must follow MTD for Income Tax. The threshold then steps down:

• April 2026, gross income over £50,000.
• April 2027, gross income over £30,000.
• April 2028, gross income over £20,000.

What “qualifying income” means

It’s your gross income, turnover, not profit, from self employment and property combined. So if you earn £35,000 from a trade and £18,000 from rent, your combined £53,000 brings you into scope, even though neither source alone exceeds £50,000. For the first phase, HMRC looks at the figures on your 2024/25 tax return.

What you’ll actually do

Instead of one annual return, you’ll have five touchpoints a year:

• Four quarterly updates summarising your income and expenses, typically due 7 August, 7 November, 7 February and 7 May.
• A final declaration by 31 January, where you confirm the year and make any adjustments. This replaces the Self Assessment return for those in scope.

Crucially, your tax payment dates don’t change. It’s the reporting rhythm that becomes more frequent, not the bill.

Who’s exempt

Some people are automatically out of scope or can apply for exemption, for example, certain trustees, those without a National Insurance number, and people for whom digital tools aren’t reasonably practicable. Limited companies aren’t affected; they continue under Corporation Tax.

Common points of confusion

Jointly owned property can put one owner in scope and the other out, depending on their share. And remember the threshold is based on gross receipts before expenses or allowances. If you’re close to a threshold, it’s worth checking carefully.

Penalties

HMRC operates a points based system for late submissions, with financial penalties once you accumulate points, plus interest on late paid tax. Missing the more frequent deadlines is an easy trap, another reason to get your systems and reminders sorted early.

How to prepare now

Move your records onto MTD compatible software such as Xero or QuickBooks, get into the habit of keeping things up to date through the year, and make sure someone is on top of the quarterly calendar. Done well, MTD isn’t just compliance, clean digital records give you a real time view of your numbers all year instead of a once a year scramble.

How we help

We get clients onto the right software, tidy the opening position, and handle the quarterly submissions and final declaration, so MTD becomes a non event rather than a worry.

This article is general information, not personal advice, and tax rules change over time. For guidance on your own circumstances, get in touch.

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