Making Tax Digital for Income Tax: What You Need to Know

What is Making Tax Digital (MTD)? Making Tax Digital is an HMRC initiative aimed at simplifying and modernising the UK tax system. It requires businesses and individuals to keep digital records and submit their tax information to HMRC using approved software.

🔗 HMRC overview of Making Tax Digital

What's Changing for Income Tax? From April 2026, MTD will apply to Income Tax Self Assessment (ITSA) for:

• Self-employed individuals

• Landlords earning over £50,000 per year

From April 2027, it will expand to those earning over £30,000. If you fall under these thresholds, you'll continue using the existing Self Assessment process (for now).

🔗 MTD for Income Tax eligibility and thresholds

Key Requirements Under MTD for Income Tax:

1. Digital Record Keeping – You'll need to keep records of income and expenses using MTD-compatible software.

2. Quarterly Updates – Submit updates to HMRC every quarter.

3. End of Period Statement (EOPS) – Confirm your income and make necessary adjustments.

4. Final Declaration – Submit a final declaration to complete your tax return.

🔗 Find MTD-Compatible Software

Benefits of MTD:

• Improved accuracy

• Real-time view of tax liabilities

• Better cashflow management

• Reduced last-minute tax surprises

Challenges to Prepare For:

• Learning new software

• Potential added costs for software subscriptions

• Staying on top of quarterly deadlines

Who Is Exempt? You may be exempt if you:

• Cannot use digital tools due to age, disability, or location

• Are subject to insolvency procedures

🔗 Apply for MTD exemption

What Should You Do Now?

1. Check if you’ll be affected in 2026 or 2027.

2. Start using digital accounting software if you haven't already.

3. Speak to your accountant about the best solution for your needs.

   
   
   
   

Helpful Resources:

• HMRC MTD Guidance

• MTD-Compatible Software List

• MTD for ITSA Overview

• Apply for MTD Exemption