Making Tax Digital for Income Tax

Making Tax Digital (MTD) is a UK government initiative designed to modernise the tax system by requiring businesses and individuals to keep digital records and submit tax returns using compatible software. It aims to reduce errors, improve efficiency, and streamline tax reporting.

From 6 April 2026, Making Tax Digital (MTD) will be mandatory for sole traders, self-employed individuals and landlords with an annual income over £50,000. As of April 2027, this will roll out to incomes over £30,000, then £20,000 from April 2028. The final threshold was announced in the 2025 Spring Statement.

You must use Making Tax Digital for Income Tax if:

• You’re registered for Self-Assessment
• You earn from self-employment, property, or both
• To begin with, your income is over £50,000. This will increase scope to over £30,000 from April 2027, and then apply to income over £20,000 from April 2028.

Making Tax Digital for VAT applies to all VAT registered businesses.

MTD stands for Making Tax Digital. MTD is a UK government initiative to modernise tax reporting by requiring businesses and individuals to keep digital records and submit tax returns using compatible software.

Each property owner will need to file their own quarterly submission for their share of income and costs. Please note, however, there is an easement which means you can elect to only report your share of income each quarter and catch up reporting of expenses in the final submission. This will make life easier for a lot of joint property owners.

The thresholds to decide what is in scope are based upon your share of revenue. If your share is above £50k then you will meet the MTD threshold from April 2026.

HMRC have confirmed that formal partnerships are not included in the scope of MTD for Income Tax currently, but they are likely to come in at some point.

No, qualifying income for MTD for Income Tax is that from self-employment and income from property only. Other income such as dividends, interest, pensions, etc. are not considered in the Qualifying Income Threshold test, but they would be accounted for in the digital tax return that will be completed in MTD compatible software.

We recognise that some individuals will prefer to keep maintaining records in Excel. While we do not recommend this practice given the substantially increased risk of errors in the quarterly MTD reporting regime, we will provide a range of services including using Excel.

If you would like us to complete and submit your return, we will be able to do that. We will support clients with the full MTD process and will have a number of options available to you regarding how much you would like to be involved in the process and how we can work together to ensure your compliance with MTD.

You can choose either the detailed pages you usually submit on your tax return today or high level three-line accounts showing revenue, costs and profit.

HMRC have said that this is a matter for individuals to decide. Some may wish to wait, and others will be more proactive and come in early. You can come into MTD for Income Tax ahead of your mandatory date. Many people are coming into the testing programme in 25/26 to gain first hand experience of what is involved and benefit from the enhanced support that is available in testing for taxpayers and their agents.

Yes, if you’re UK tax resident your qualifying income will include your:

• Self-employment income
• UK and foreign property income

We’re collaborating with MTD-compliant software vendors, including Xero, to ensure all systems we use are fully aligned with HMRC’s digital requirements. We will be launching a range of MTD services aimed at keeping your tax records and affairs up to date and compliant and will have a range of options available to you tailored to your needs.

Limited companies are not in scope for MTD for Income Tax.

Assuming that income generated from the limited company is the only source of income then you would remain outside scope for MTD. If you also had rental property income and sole trade income then you would need to review the thresholds.

There are no changes to the current payment of tax and no changes to the existing payment frequency. The only time a tax liability is generated is when the final declaration is submitted.

This is not part of the qualifying income for MTD and will remain reportable annually either in self-assessment or part of the final declaration process if you are in scope for MTD.

As well as MTD for Income Tax compliance, submitting records digitally offers benefits such as a reduced admin time, paperwork, more accurate financial records and the availability of real-time information about your finances. MTD for Income Tax also puts the information into the hands of your tax adviser more regularly – helping with forward tax planning and forecasts, and avoiding any January surprises on what the tax bill will be.

You can find out more about  cloud accounting  and the benefits to you and your business.

MTD-compatible software for Income Tax is software that supports the requirements of Making Tax Digital for Income Tax. HMRC have created a list of approved software for MTD for Income Tax.

HMRC have confirmed that they will write to taxpayers to confirm that they have met the qualifying income threshold and will be coming into MTD for IT. For April 2026, this will be based on the declared income for the 24/25 tax year, due by 31 January 2026. HMRC will then write to taxpayers from February 2026. This will be very short notice, so HMRC have started writing to taxpayers now, based on 23/24 tax returns, to inform them that they will likely be coming into MTD, they will then confirm once the 24/25 return comes in.