The UK’s tax landscape is undergoing a significant transformation with the introduction of Making Tax Digital (MTD) for Income Tax. This is the second stage of the Making Tax Digital rollout with the first being MTD for VAT in April 2019 and future rollouts likely for partnerships and limited companies. The initiative aims to modernise the tax system, making it more efficient and easier for taxpayers to manage their affairs. As we approach the implementation dates, it’s crucial to understand what MTD entails and how it will affect you.
What Is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax is designed to digitise the process of reporting income and expenses. Under MTD, individuals such as sole traders and landlords will be required to:
- Keep digital records of income and expenses.
- Use compatible software to submit quarterly updates to HMRC these updates will need to include your quarterly turnover and expenses.
- Provide an end-of-period statement and a final declaration annually (just like your normal annual tax return).
The stated goal is to reduce errors, improve efficiency, and bring the tax system closer to real-time reporting.
Who will be affected and when?
The rollout of MTD for Income Tax will occur in phases:
- From 6th April 2026: Individuals with a combined annual self-employment or property income over £50,000 will need to comply. This will be based on your 2024/2025 tax return.
- From 6th April 2027: The threshold lowers to include those with a combined self-employment and property income over £30,000.
If your income falls below these thresholds, you won’t be required to use MTD for Income Tax at this time. We will continue to release more information on this upcoming rollout and will release further details over the coming weeks so keep your eyes out for updates and let us know if you have any questions at this stage.
