Making Tax Digital for Income Tax starts in April 2026.
It’s introduction affects taxpayers at different times over the next few years, with an individual start date decided by the amount of business or landlord turnover.
Who is affected and when:
If you are a sole trader or landlord with a combined gross income of over £50,000, you will need to comply with MTD from April 2026.
If your qualifying income is over £30,000, you will need to comply from April 2027.
If your qualifying income over £20,000 will need to comply from April 2028.
If you are automatically brought into MTD, from April 2026 onwards:
You must start reporting your income to HMRC in a different way.
Instead of sending your information once a year to HMRC you will be sending information more often, and using software to calculate and submit your figures.
You will need to:
Keep Digital Records:
If you currently use paper records you will be affected the most by the new regime, because from April 2026 you must change the way you keep your business records and use a digital format instead.
A ‘digital format’ means using MTD compatible book-keeping software, for example QuickBooks or Free Agent, or using a spreadsheet such as Excel or Google Sheets together with compatible ‘bridging software’.
You might have previously written all your income and expenses in a book, stored your receipts in a bag or box, and even typed a few totals into your self assessment tax return at the end of each tax year. But under the new regime this is no longer permitted.
Instead you will need to enter your income and expenditure into a digital solution, update it regularly, and structure and store your records digitally.
Submit Quarterly Updates to HMRC:
Instead of sending your income and expenses to HMRC once a year, you will send them four updates per year using digital software. Each of these updates sends a basic summary of your activities from the previous three months.
File a Final End of Period Statement:
At the end of each year you will have to confirm to HMRC that your submitted income and expenses are accurate, make any necessary adjustments to the figures (such as for specific tax reliefs) and then submit your Final Declaration.
Your Final Declaration replaces your annual self assessment tax return.
Paying your Tax:
Nothing is changing regarding due dates for tax payments – you will still pay tax by the same usual deadlines that are in place now.
The role of Accountants:
We know that many accountancy firms, including ourselves, have concerns over the additional workload MTD brings.
The additional work required to meet quarterly rather than annual deadlines means that accountancy fees are likely to increase.
Of course, it is not a condition of MTD that you use an accountant at all, you can simply deal with all of the required digital submissions yourself if you feel confident to do so.
