What is Making Tax Digital?
Making Tax Digital (MTD) is part of HMRC’s ongoing programme to modernise and simplify the tax system. It will already be familiar to VAT-registered businesses and sole traders who have been making MTD returns since 2019.
It means taxpayers must keep digital records and submit quarterly tax returns using MTD compatible software.
The mandatory deadline for landlords, sole traders and the self-employed with an annual income of £50,000 is April 2026.
This means that:
- from April 2026 you will be no longer be able to use HMRC’s website to file your returns.
- you will need to keep digital records using MTD-compatible software, such as those provided by Xero, QuickBooks and Sage.
- you will need to submit quarterly updates and a final declaration that includes all other taxable income by 31 January every year.
Those with an annual income of £30,000 or more will be pulled into the MTD net from April 2027. This drops to £20,000 from April 2028.
What do I need to do differently for MTD for Income Tax?
If you are affected, you will need to do the following:
- Digital record-keeping: You must maintain accurate digital records of all business and property income and expenses using MTD-compatible software
- Quarterly submissions: You will need to submit income and expense information to HMRC every three months. These are cumulative over the tax year, so you will be able to make adjustments to correct any previous submissions in future updates. These are the quarterly update deadlines:
- 6 April to 5 July – due by 7 August
- 6 April to 5 October – due by 7 November
- 6 April to 5 January – due by 7 February
- 6 April to 5 April – due by 7 May
- Final declaration: In your final declaration, you must report additional income sources like investments or savings and submit any claims for relief. This declaration, along with the payment, is due by January 31st following the end of the tax year. This replaces the traditional Self Assessment tax return and ensures all income sources are accounted for.