Wednesday April 23rd 2025
There is less than a year to go until sole traders and landlords with an income over £50,000 will be required to use Making Tax Digital (MTD) for Income Tax.
Making Tax Digital was launched on 6th April 2026 marking a significant and what should be ultimately a time-saving change in how these individuals will need to keep digital records and report their income to HM Revenue and Customs (HMRC).
HMRC say that by keeping digital records throughout the year, sole traders and landlords should save hours previously spent gathering information at tax return time, allowing them to spend more time focusing on their business activities and in turn, driving economic growth as part of the Government’s Plan for Change.
Quarterly updates will spread the workload more evenly throughout the year, bring the tax system closer to real-time reporting and help businesses stay on top of their finances and avoid the last-minute rush.
HMRC is urging eligible customers to sign up to a testing programme on GOV.UK and start preparing now. Agents can also register their clients via GOV.UK.
James Murray MP, Exchequer Secretary to the Treasury, said:
“MTD for Income Tax is an essential part of our plan to transform the UK’s tax system into one that supports economic growth.
“By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share.
“This is a crucial step in this government’s decade of national renewal and our Plan for Change, as we clear away barriers that hold back growth.”
Craig Ogilvie, HMRC’s Director of Making Tax Digital, said:
“MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.
“By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year.”
From April 2026, individuals with qualifying income above £50,000 will need to keep digital records, use MTD-compatible software and submit quarterly summaries of their income and expenses to HMRC. These digital requirements will help businesses save time through more efficient record-keeping, reduce errors in tax calculations, and provide a clearer picture of their tax obligations throughout the year.
Qualifying income includes gross income from self-employment and property before any tax allowances or expenses are deducted. Those with qualifying income above £30,000 will also be required to use MTD for Income Tax from April 2027. The threshold will then decrease to £20,000 from April 2028.
The phased introduction of MTD for Income Tax follows the successful implementation of MTD for VAT, which now helps more than two million businesses reduce errors and save time on their tax affairs. Businesses which joined the MTD for VAT testing phase were better prepared for the move to quarterly reporting.
An independent report published in 2021 found that 69% of mandated businesses experienced at least one benefit from MTD for VAT, while 67% reported that it reduced the potential for mistakes in their record keeping.
Around 780,000 self-employed individuals and landlords will be required to use MTD for Income Tax from April 2026, with a further 970,000 joining from April 2027. Penalties for late quarterly updates will not apply during the testing phase, providing an ideal opportunity to get used to the new process without risk.
More information on MTD for Income Tax can be found at: HERE.
More information on finding compatible software can be found at: HERE.
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