Making Tax Digital

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s plan to digitise the tax system for VAT, Income Tax Self-Assessment and Corporation Tax for businesses.

MTD aims to make it easier for individuals and organisations to get their tax right and manage it more easily.

What is MTD for Income Tax and who is affected?

MTD for Income Tax is the next step in the MTD timeline. It is a new way to report income from self-employment and property to HMRC and will be introduced in phases starting in April 2026.

From April 2026 if you have qualifying income of over £50,000 annually, you'll need to use MTD compatible software and make a quarterly submission to HMRC.

Your qualifying income can be from self-employment (not partnerships), rental or both. HMRC will look at your gross income (or ‘turnover’) from the year before. So, if you submitted a tax return for tax year 2024 to 2025, they’ll use this to work out your qualifying income for the 2026 to 2027 tax year.

What if my gross income is below £50,000?

HMRC have announced that from April 2027 MTD for Income Tax will be mandated for self-employed businesses and landlords with business turnover above £30,000.

Sole traders or landlords with a gross income from self-employment and property over £20,000 will be introduced into the MTD system at some point in the future.

How does MTD change Self-Assessment?

The 3 key changes MTD for Income Tax will make to your financial management:

Digital record keeping

You'll need to use MTD compatible software to keep digital records of your income and expenses.

Quarterly submissions

You'll need to submit quarterly summary data to HMRC electronically using relevant software.

Submit a tax return

Similar to now, at the end of the year, a final Tax Return must be submitted making any adjustments to your business income and expenses, reporting all income sources, and making a final declaration to confirm the information is complete and accurate. HMRC will then confirm the tax you owe, payable by 31 January the following tax year.

How will MTD for Income Tax help you?

These changes will help to:

Ensure you have accurate information to help with business planning and to support business productivity
Saves time by keeping financial admin all in one place and helps automate repetitive tasks
Store your information safely and securely through two factor authentication (2FA) and data encryption
Collaborate with us, as your accountant with ease, through software that allows you to share information instantly.