Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) aims to simplify the UK’s tax system by moving to digital records and regular reporting.
Instead of submitting an annual Self Assessment tax return, you will:
- Keep digital records of income and expenses using approved software
- Submit quarterly updates to HMRC
- Provide a final declaration at the end of the tax year
Implementation of Making Tax Digital for Income Tax
The roll-out of MTD for Income Tax will happen in phases:
- From April 2026 – Sole traders and landlords earning over £50,000 annually must comply
- From April 2027 – The threshold reduces to £30,000 annually
These figures refer to Gross Income, which is your income before deducting expenses. If you have multiple income streams, such as self-employment and rental income, the system combines them to calculate your eligibility.
Effective Dates for Making Tax Digital for Income Tax
- April 2026 – For sole traders and landlords with an annual income over £50,000
- April 2027 – For sole traders and landlords with an annual income over £30,000
- To be Confirmed – Individuals earning over £20,000 annually
Currently, these deadlines do not include partnerships, but the government plans to mandate MTD for partnerships at a later date.
How Making Tax Digital Will Work for Income Tax
You must use MTD-compatible software to record all business income and expenses. This software can be a cloud-based accounting system or even an app on your phone, only if approved by HMRC.
HMRC has a list of approved software providers on GOV.UK
Every quarter, you will submit your income and expenses to HMRC. The deadlines for submissions are:
- 6th April to 5th July (submit by 7th August)
- 6th July to 5th October (submit by 7th November)
- 6th October to 5th January (submit 7th February)
- 6th January to 5th April (submit by 7th May)
You may be able to align these periods with your calendar months if approved by HMRC.
You will submit a Final Declaration at the end of the tax year, therefore replacing the current Self Assessment tax return. The Final Declaration includes all income sources and also confirms your total tax liability.
Exemptions from Making Tax Digital for Income Tax
You may be exempt from MTD for Income Tax if:
- You cannot use digital tools due to age, disability or location
- You are part of a religious society with beliefs incompatible with digital record-keeping
- You are a trustee or a personal representative of a deceased individual
Additional exemptions include certain non-resident companies and Lloyd’s members. If you believe you qualify for an exemption, you will need to apply to HMRC for approval.
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