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MTD for Income Tax–Effective from April 2026

MTD-for-Income-Tax

MTD for Income Tax will commence in April 2026, making it mandatory for individuals with property rental income and sole traders (self-employed). Voluntary participation is possible starting from April this year. This article aims to provide a brief note that may be helpful for preparation.

MTD for Income Tax Scope

The Making Tax Digital programme aims to provide real-time and accurate information on tax matters, contributing to the digitalisation of UK tax. MTD for VAT has been mandatory for all VAT-registered businesses since April 2022.

MTD for income tax is scheduled to begin in April 2026, affecting self-employed individuals and those receiving property rental income if they meet certain gross income thresholds.

However, not all individual landlords and sole traders will be required to comply with MTD. It is essential to check your specific circumstances to determine compliance requirements. The government has not yet implemented MTD for partnerships, which could be gradually followed.

MTD for Income Tax Thresholds

As stated previously, individuals whose income exceeds certain thresholds will be required to comply with mandatory Making Tax Digital regulations. The table below details the qualifying income thresholds:

Effective April 2026

Effective April 2027

Moving Ahead

Having a qualifying income exceeding£50,000 for the tax year ending on 5 April 2025.

Possessing a qualifying income exceeding £30,000 for the tax year ending on 5 April 2026.

The qualifying income over £20,000will use MTD in the future and the timeline will be provided later.

Qualifying earnings refer to the gross income generated from property rental, self-employment, or a combination of both. Please note that you will not be subject to Making Tax Digital for income tax if your income includes dividends, interest, or other types of income. Instead, you will continue to perform the annual self-assessment as you currently do.

MTD for Income Tax

How MTD for Income Tax Operates?

Please adhere to the following steps if you are required to comply with the Making Tax Digital regulations for your income tax matters:

  • Digital Record Keeping: It is essential to maintain your income and expenditure records digitally. Utilising MTD compliance software is recommended for this purpose. Should you require assistance, we highly suggest researching online methods for digital accountancy record keeping. Additionally, consulting your tax accountants about the functionalities of digital accounting is advisable.
  • Quarterly Submission: After establishing a digital records facility, it is necessary to prepare and submit your income and expense reports on a quarterly basis to HMRC. The schedule for quarterly submissions is outlined below:

Quarter

Period

Due Date

First

6 April to 5 July

or

1 April to 30 June

by 7 August

Second

6 July to 5 October

or

1 July to 30 September

by 7 November

Third

6 October to 5 January

or

1 October to 31 December

by 7 February

Final

6 January to 5 April

or

1 January to 31 March

by 7 May
  • Annual Personal Income Tax Filing:During the process of finalising your personal tax, it is necessary to adjust your income and expenses to determine the final taxable profit. The amendment can also be submitted through your quarterly updates.

In the annual self-assessment tax return, other taxable income such as dividends, salary, interest income, and more should be included. This process may eventually be completed through software, replacing the traditional self-assessment tax return.

Final Thoughts

It may be your first time navigating the digitalisation of tax matters. We recommend the following steps: 

  1. Maintain a dedicated bank account for all income and expenses related to your property rental income, which will streamline record management. You can apply the same approach for your self-employed business.
  2. Acquire software that links your bank account and facilitates automatic updates of bank transactions. This will save your valuable time.
  3. Consult with your tax accountants ahead of time to avoid any last-minute stress.

At Stan Lee Accountancy Ltd, we are ready to assist you with Making Tax Digital (MTD) for Income Tax. We offer complimentary support for signing up with HMRC. Our services include the most common and user-friendly software solutions, such as IRIS, Xero, Sage, and others tailored to your needs. Schedule a call with our experts today!