Making Tax Digital (MTD) is a UK government initiative to digitise the tax system, starting with income tax for the self-employed and landlords beginning in April 2026.
It replaces the annual Self Assessment tax return for those affected with new obligations for digital record-keeping and regular quarterly updates submitted via compatible software.
Who is affected by MTD for Income Tax?
The rollout of MTD for Income Tax is being phased in based on a taxpayer's gross annual income from self-employment and property:
- April 2026: Mandatory for those with qualifying income over £50,000.
- April 2027: Mandatory for those with qualifying income over £30,000.
- April 2028: Mandatory for those with qualifying income over £20,000.
- Those with qualifying income below £20,000 are not currently required to join, though this is under review.
What are the main requirements?
For those affected, MTD involves three key components:
- Digital Record-Keeping: You must maintain digital records of your business income and expenses using HMRC-approved software.
- Quarterly Updates: Instead of one annual tax return, you must submit a summary of your income and expenses to HMRC every three months.
- Annual Digital Tax Return: At the end of the tax year, you must submit a final declaration to confirm your tax position. The tax payment due dates remain the same as with Self Assessment.
How to prepare
To get ready for MTD, you should:
- Check if your total qualifying income exceeds the threshold for your start date.
- Select HMRC-recognised accounting software.
- Begin keeping digital records as soon as possible.
- You must sign up for MTD through your chosen software, not directly with HMRC.
Exemptions
You may be exempt if:
- You are "digitally excluded," meaning it is not reasonably practical for you to use digital tools due to age, disability, location, or religious beliefs incompatible with electronic communication.
- Your qualifying income is below the thresholds.
Consequences of non-compliance
If you are required to join MTD but miss deadlines for quarterly updates or the final tax return, you will face a new points-based penalty system.
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