From April 2026, Making Tax Digital for Income Tax (MTD for IT) will become mandatory for many self-employed persons and landlords, marking a significant change in how they manage their tax affairs. The new regime is designed to modernise the tax system by requiring taxpayers to interact with HMRC through an online tax account, rather than relying solely on an annual self-assessment return.
Initially, MTD for IT will apply to individuals with qualifying income of more than £50,000 a year from self-employment and/or property. From 6 April 2027, the scope will widen to include those with income between £30,000 and £50,000. Alongside this, a new points-based penalty system will be introduced for the late filing and late payment of MTD for IT liabilities.
Under MTD for IT, affected taxpayers will need to keep digital records of their income and expenses using compatible software. Instead of reporting everything once a year, they will be required to send quarterly updates to HMRC, providing a summary of their business or property income and costs. These updates are not tax bills, but they are intended to give HMRC a clearer picture of income throughout the year. A final declaration will still be required after the end of the tax year, with any tax due payable by 31 January following the year end.
Qualifying income is a key concept under MTD for IT. It is broadly the total income earned in a tax year from self-employment and property income, including income from multiple trades or rental properties. Other sources of income reported on a tax return, such as employment income under PAYE, dividends, pensions or partnership income, does not count towards this threshold.
If you are unsure how MTD for IT will affect you, or would like any support preparing for the change, we would be happy to help.
