The countdown is on. With only six months until the introduction of Making Tax Digital for Income Tax (MTD for IT) now is the time to get prepared. If you’re a self-employed individual or a landlord, this affects you. Ignoring it could lead to penalties and a whole lot of stress.
What is Making Tax Digital for Income Tax?
MTD for IT is a major change to the tax system. It means a fundamental shift away from the once-a-year Self Assessment tax return. Instead, qualifying businesses and landlords will need to:
- Keep digital records: All business income and expenses must be recorded digitally using MTD-compatible software. This means no more shoeboxes of receipts or manual spreadsheets.
- Submit quarterly updates: Instead of an annual tax return, you will be required to send a summary of your income and expenditure to HMRC every quarter.
- Finalise your tax position: At the end of the tax year, you will use your MTD software to submit a “Final Declaration” to HMRC, which will be the equivalent of your current Self Assessment tax return.
Who is affected and when?
The rollout of MTD for IT is being phased in based on income thresholds.
- From 6 April 2026: Sole traders and landlords with a qualifying income of more than £50,000 from their self-employment and/or property.
- From 6 April 2027: Sole traders and landlords with a qualifying income of more than £30,000 from their self-employment and/or property..
- From 6 April 2028: Sole traders and landlords with a qualifying income of more than £20,000 from their self-employment and/or property.
Important Note: Your qualifying income is the gross income before any expenses are deducted. HMRC is currently identifying taxpayers who will be in scope for the April 2026 deadline, based on their 2024/25 tax return, and will be notifying them by letter.
The 6-Month Action Plan
With the April 2026 deadline fast approaching, it’s not a time to delay. If you are going to be affected by these changes here’s what you should be doing now.
With the deadline rapidly approaching, here are the key steps you should be taking:
- Check if MTD for IT affects you: Review your gross income from self-employment and property for the 2024-25 tax year. If it exceeds £50,000, you are in the first phase of MTD.
- Choose MTD-compatible software: This is a non-negotiable step. You will not be able to file your returns using the old HMRC online portal. You’ll need to find a software package that has been approved by HMRC for MTD for IT. There are many options available, from full accounting packages to simpler, more user-friendly ones designed for smaller businesses.
- Start keeping digital records: Once you have your software, you need to begin using it to record your income and expenses. While the formal quarterly submissions don’t start until April 2026, getting into the habit of digital record-keeping now will make the transition seamless.
- Consider a voluntary sign-up: HMRC has been running a pilot scheme for MTD for IT. If you meet the criteria, you can voluntarily sign up now. This gives you the opportunity to test the process, iron out any issues, and get comfortable with the new system before it becomes mandatory.
- Speak to an accountant or tax adviser: This is a complex change, and professional advice can be invaluable. A tax professional can help you choose the right software, ensure your records are compliant, and guide you through the transition.
The changes brought by MTD for IT are significant. Getting ahead of the curve now will save you a lot of time and potential headaches down the line. Don’t leave it to the last minute—the six-month countdown has already begun.
The Benefits of Going Digital
While the changes may seem daunting, MTD for IT is designed to make tax administration simpler and more efficient in the long run. Benefits include:
- Better financial visibility: Quarterly reporting gives you a clearer, more up-to-date picture of your business’s financial health.
- Reduced errors: Digital records and software can minimise the risk of human error.
- Time saving: Keeping your records up to date as you go avoids the last-minute rush and stress of the annual tax return deadline.
Don’t wait for the letter from HMRC. Take action now to ensure you are ready for this significant change. The next six months are a window of opportunity to get prepared and make MTD for IT a seamless part of your business operations.
How can we help?
We can help you choose the right compatible software for you and your business and help you get started.
We are part of the HMRC testing phase so we know what to expect when the first live submissions are due and can guide you through the changes.