Making Tax Digital for Income Tax (MTD for IT) 

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There has been much discussion about Making Tax Digital for Income Tax but what is it and what does it mean for you.


What is MTD for IT?

MTD for IT is a fundamental change in the way that Sole Traders and landlords report their income to HMRC, moving away from the annual filing of the self assessment tax return to a quarterly return of the Income and expenses from the business or property letting followed by an end of year return to include all other income sources. 

MTD for IT requires that the business maintains digital business records and uses HMRC approved software to file its quarterly updates. 

There is no requirement to pay tax quarterly and the normal payment dates of 31 January and 31 July each year remain the same.


Who does MTD for IT apply to?

MTD for Income Tax applies to Sole traders and Landlords, it does not apply to partnerships, LLP’s, Trusts or Companies…. at the moment! If you are not a sole trader or a landlord you continue to file your tax returns on the Self Assessment system as normal.

I’m a sole trader or a landlord - when do I have to start filing under MTD for IT?

Transfer (mandation) on to the MTD for IT system is being phased in from 6 April 2026 based on turnover levels reported on the 2024/25 Self assessment returns to be filed between April 2025 and January 2026

  • If your combined turnover for all sole trader and landlord activities is more than £50,000 your start date is 6 April 2026

  • If your combined turnover for all sole trader and landlord activities is more than £30,000 your start date is 6 April 2027

  • If your combined turnover for all sole trader and landlord activities is less than £30,000 your start date has not been confirmed yet

Once you have filed your 2024/25 self assessment tax return you will know your start date and once you are in MTD for IT you will remain in for 3 years even if your turnover drops below the threshold.

I need to start filing under MTD for IT from 6 April 2026 - what do I need to do?

Firstly you need to think about where you are now:

  • How you currently maintain your business records?

  • How much do you want to continue doing yourself and how much help do you want from your accountant?

  • Are you tech savvy - Will you feel comfortable making quarterly returns yourself? 

Once you have thought about these questions, talk to your accountant. We are all making preparations for this change and are here to help.

Next, choose some suitable software again speak to your accountant about what they would recommend for you - there are currently 17 companies listed with compatible software with 14 in development so lots of choice.

We’ve partnered with Dext Solo and Xero to support our clients with MTD for IT.


What are the deadlines for MTD for Income Tax?

Quarterly updates must be filed by the 7th of the month following the end of the quarter - the quarters and deadlines are: 

The end of year update must be filed by 31 January following the end of the tax year in line with the current self assessment filing date.

What happens if I don't file my quarterly returns under MTD for IT?

If you file your returns late or not at all you will receive a penalty point and once the points threshold is reached, a financial penalty will be imposed. 



Conclusion


Preparation is essential to make sure that you are ready for MTD for IT when it arrives. We strongly recommend that if you are not maintaining your records digitally already that you start as soon as you can to get ahead of the change. Speak to your accountant, we’re here to help.

If you need further assistance with this, get in touch!