What is MTD for Income Tax and will it affect me?

Making Tax Digital for Income Tax (MTD for IT) is a new way for self-employed business owners and landlords to report earnings and it replaces the existing self assessment tax return process.  

 

Anyone who is self employed and/or a landlord who has income above £50,000 (that is income before setting off expenses) will have to file quarterly returns from April 2026.  

 

From April 2027 those with income over £30,000 will have to start and finally those who have income over £20,000 will follow from April 2028. 

 

At the moment it doesn't include partnerships.  

 

It's important to note that you might be both self employed and a landlord; therefore you should add both income streams together to check whether you meet the threshold. For example, you might earn income as a sole trader totalling £20,000 and also rent out a property that generates £950 per month in rent. Adding this income together means you have £31,400 total income before expenses and therefore will need to get ready for MTD from April 2027. 

 

From 6th April 2026, if you meet the criteria for MTD you will need to do the following: 

 

• sign up for MTD via HMRC’s website 

• keep digital records (this means no more paper records!) 

• use MTD-compatible accounting software such as FreeAgent, Xero, QuickBooks etc  

• send quarterly business income and expenses updates to HMRC through the software (there are penalties for submitting late!) 

• provide a final declaration by 31st January following the tax year 

 

No, the tax payments are still due by 31st January.  

 

If you have to pay payments on accounts these are still due by 31st January and 31st July.  

 

Quarterly summaries will include income and expenses for each self-employment and property business 

 

The four quarters are: 

• 6th April to 5th July 

• 6th July to 5th October 

• 6th October to 5th January 

• 6th January to 5th April 

 

The quarterly updates will give business owners and landlords a year-to-date calculation of how much tax they owe, based on the information provided in the summary. Whilst MTD brings with it more administration and compliance it gives the tax payer a good indication of how much tax they will have to pay, which allows you to save up and set the cash aside as you go.  

 

Sole traders and landlords will also need to use their accounting software to finalise their overall tax position at the end of the year. Any other income earned during the year also goes on this final return. This return now replaces the annual self assessment tax return.  

 

MTD for Income Tax is the biggest change to the self assessment tax return process in decades, so it will take people some getting used to, especially when you haven't used software before.  

 

If you need help getting ready for MTD, or you think you need to submit quarterly returns but don't know where to start you can contact our team here >>>.  

 

We can help you get set up, choose software and show you how to do your returns. We can either do it all for you or just help you with the final submission - it's up to you and we have different price packages to suit.