Making Tax Digital for Income Tax: Are You Ready?
You may have heard about Making Tax Digital (MTD) for Income Tax for several years now. Originally scheduled to begin in 2018, the rollout has been delayed multiple times.
However, the changes are now firmly on the horizon. MTD for Income Tax will begin in April 2026, bringing one of the biggest changes to the Self Assessment system in decades.
If you’re self-employed or a landlord, it’s important to understand what’s coming and how it will affect you.
So, what exactly is changing - and what will you need to do?
What is Making Tax Digital for Income Tax?
Making Tax Digital is a UK government initiative designed to modernise the tax system.
The aim is to move away from paper records and a single annual tax return, and instead requiring digital record-keeping and more frequent reporting.
In practice, this means you will need to:
- Keep digital records of your income and expenses
- Use HMRC-approved, cloud-based software
- Submit quarterly updates to HMRC
- File a final year-end declaration
The goal is to improve accuracy, reduce errors, and give taxpayers a clearer view of their tax position throughout the year.
Who will be affected
MTD for Income Tax will apply to self-employed individuals and landlords.
The threshold is not based on profit but on gross income (before expenses) from self-employment and property combined, not profit.
The start date depends on your level of income:
Gross income over £50,000 - Start using MTD for Income Tax from 6 April 2026
Gross income over £30,000 - Start using MTD for Income Tax from 6 April 2027
Gross income over £20,000 - Start using MTD for Income Tax from 6 April 2028
If your income falls within these thresholds, you will need to follow the new rules from the relevant start date.
What will you need to do?
Under MTD for Income Tax, there are four key requirements:
1. Keep digital records
You must keep digital records of your income and expenses for both your self-employed business and any rental property.
For most people, this means using cloud-based accounting software rather than spreadsheets or paper records.
We specialise in supporting clients using Xero accounting software, which is fully compatible with MTD requirements.
2. Submit quarterly updates
Instead of reporting your income once per year, you will submit quarterly summaries of income and expenses to HMRC.
These updates are sent directly from your accounting software.
It’s important to note that these quarterly submissions on their own do does not determine your final tax liability, and no tax is due to be paid when these quarterly submissions are made.
3. End of Period Statement
At the end of the tax year, you will need to finalise your business figures, make any necessary accounting adjustments, and confirm your income for the year.
4. Final declaration
You will then submit a final declaration, confirming your total taxable income from all sources.
This effectively replaces the traditional Self Assessment tax return.
How to prepare now
The first step is to review your 2024/25 tax return.
If your gross income from self-employment and property exceeds £50,000, you will need to comply with MTD from 6 April 2026.
If you fall into this category, you should begin tracking your income and expenses digitally as soon as possible.
If you are not already using cloud accounting software, now is the time to start.
Your first quarterly submission deadline will be 7 August 2026.
Starting early will make the transition significantly smoother.
Summary
Making Tax Digital for Income Tax represents a major shift in how self-employed individuals and landlords report their income to HMRC.
While it introduces more frequent reporting, it should also provide:
- Greater accuracy
- Better record-keeping
- Improved visibility of your tax position throughout the year
If you have any questions, contact the team via our Contact Us page - simply click here