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Making Tax Digital (MTD) is HMRC’s initiative to digitalise and modernise the UK tax system. Following the introduction of MTD for VAT in 2019, HMRC has now implemented the second stage of their MTD rollout: Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA).
What is MTD for Income Tax?
From April 2026, MTD for ITSA will effect many self-employed individuals and landlords across the UK. If you fall into this group, it is important to understand what is changing and how to prepare. Under MTD for ITSA, affected taxpayers will need to:
- Keep digital records of income and expenses.
- Use compatible software to submit updates to HMRC.
- Send quarterly summaries of their income and expenses.
- File an end of year digital tax return.
Who is Affected?
Initially, MTD for ITSA will apply to:
- From April 2026, self-employed individuals and landlords with combined turnover from those sources of more than £50,000.
- Turnover from self-employment and/or property of between £30,000 and £50,000 will be mandated from April 2027.
- Turnover from self-employment and/or property of over £20,000 will be mandated from April 2028.
Key Changes for You
- Quarterly Submissions: You will need to submit a summary to HMRC of your income and expenses every three months. These are not ‘mini tax returns’ but help HMRC keep a running view of your income.
- Digital Record-Keeping: You will need to use HMRC-approved software to keep and submit your financial records. Spreadsheets may still be used, but they must link with bridging software that can connect to HMRC’s systems.
Hunter Gee Holroyd work with a number of software providers, each tailored to clients of different needs and preferences, to assist in complying with MTD. Please contact us for further information.
- Year-End Filing Still Required: At the end of the tax year, you will still finalise your income with a digital tax return. Similar to what is currently done with your Self-Assessment tax return.
Exemptions:
HMRC have announced a few exemptions from MTD in relation to 2026/27. If on your 2024/25 tax return one of the following applied:
- You claimed farmers averaging relief,
- Included the SA107 pages to report income from trusts and estates,
- Included the SA109 residency pages.
Final Thoughts
MTD for Income Tax is a significant change, but it also offers opportunities to streamline your record-keeping and gain clearer insights into your business finances.
Although the frequency of reporting is going to change, the timing of tax payments will not. The current system of payments on account and balancing payment by 31st January after the tax year is expected to remain in place for the foreseeable future.
If you think you fall under the new MTD regime, you will need to register with HMRC for MTD for Income Tax as soon as possible. We are more than happy to assist you in dealing with this.
You may have received correspondence from HMRC recently about MTD for Income Tax, this is not confirmation that you are registered but is merely an information flyer from HMRC.
Need Help? Get In Touch!
If you have any questions or want help getting started with digital record-keeping, feel free to get in touch.
Call us on 01904 655202 or email enquiries@hghyork.co.uk. Alternatively, take a look at our Cloud Accounting page or Specialist Tax page.
