What is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) for Income Tax will be introduced from 6 April 2026 for the self employed and landlords with turnover (income before deduction of expenses) above £50,000 per year.
Am I affected?
If turnover exceeds £50,000 in the year ended 5 April 2025, there will be a requirement to keep digital records of your business income and expenses from 6 April 2026. There will also be a requirement to submit quarterly updates to HMRC using approved and compatible accounting software together with a final declaration which is the equivalent of the self-assessment tax return currently completed.
Once the £50,000 threshold has been breached, the taxpayer will be required to remain in MTD for Income Tax for a period of three tax years regardless of whether their turnover drops below £50,000 during that period.
The threshold will reduce to £30,000 from 6 April 2027 and £20,000 by the end of the current parliament. This will bring a significant number of self-employed individuals and landlords into the system.
VAT registered?
A VAT registered business still has an obligation to submit quarterly reports under MTD for Income Tax, although the transition should be easier as VAT registered businesses will already be keeping digital records using compatible software to comply with MTD for VAT.
What should I do now?
If turnover on your 2023/24 Tax Return is close to or exceeds £50,000, you will shortly receive a letter from HM Revenue and Customs advising you that you that you need to start considering MTD for Income Tax.
The next step
Don’t delay - come and speak with us to understand your options, what software is available and how we can help to make your MTD for Income Tax journey a smooth one. Get in touch with Nicola Edwards or Claire Topham to discuss further.
