If you haven’t received a letter from HMRC already, you’ll be receiving one very soon.

The starting date of Making Tax Digital for Income Tax (MTD) is less than a year away and with its additional administration and cost for the taxpayer, it is the single biggest change to the taxpayers’ reporting obligations since the introduction of self-assessment.  Preparation is key… and we can help!

Who is included?

MTD for Income Tax will become mandatory for sole traders and landlords in phases starting from 6 April 2026.

The starting date is dependent on the individual’s gross income before expenses are deducted and is mandatory in phases starting from 6 April 2026 as detailed below:

• From 6 April 2026: the gross income threshold from these sources is more than £50,000.
• From 6 April 2027: the gross income threshold from these sources is more than £30,000.
• From 6 April 2028: the gross income threshold from these sources is more than £20,000.

The threshold test applies to the combined gross income of an individual’s trade(s) and property income, including overseas property income.  For example, an individual with trading sales of £30,000 and £21,000 gross rental income, must report under MTD from 6 April 2026.

Who is excluded?

In addition to those below the thresholds, partnership members, including LLPs, are outside MTD in respect of their partnership income.  Where partners are in receipt of sole trade or rental income outside the partnership, the normal rules apply.  Limited companies are excluded.

The registration process

Before 6 April 2026, HMRC will identify from 2024-25 filed tax returns, individuals with qualifying income of more than £50,000.

They will write to the individual to confirm that they must start using MTD by 6 April 2026.

The individual or agent must sign up for Making Tax Digital for Income Tax, and find software that works with MTD.

What is involved?

MTD has three key parts, namely digital records, quarterly updates, and the end of year return.  It requires digital records of the amount, category and date of income/expenses relating to the individual’s self-employment and/or property business to be kept in some form of software.  Updates of income and expenses are required by HMRC every three months.

Penalties for late submission

Late submissions penalties within MTD will move to a points-based system.

When a filing deadline for quarterly updates and year end submissions is missed, a point is received.  A £200 penalty is issued on reaching a set threshold, any other late filings will trigger a further £200 penalty. The penalty position is reset following a set period of compliance.

The existing self-assessment penalty regime will continue to apply for those outside of MTD.

How we can help

We can take care of this if you’d like us to, so there’s nothing you need to worry about.  We can register you for MTD, set out what information we need from you and take care of the quarterly reporting. 

Contact us here or drop us a WhatsApp and we’ll take you through what’s involved!