Making Tax Digital for Income Tax (previously known as MTD ITSA) will apply from April 2026 and will affect landlords and sole traders whose gross self-employment income from these sources is above £50,000.
From April 2027, the threshold will lower to £30,000.
MTD IT is expected to be extended to partnerships in the future, but no date has yet been set.
What Will Change?
When MTD IT becomes mandatory, those affected will be required to:
keep digital accounting records in a software or spreadsheet (paper records will be insufficient)
submit quarterly updates to HMRC and finalise their annual tax position at year end
Quarterly updates can be submitted to HMRC using MTD compatible software
What Will Not Change?
MTD IT will not change:
underlying income tax rules (other than those which support paper records)
the amount of detail which needs to be submitted
the filing and payment deadlines
When Does It Start?
The first quarterly return for the period April 6 to July 5, 2026 will be due on August 7, 2026.
The final declaration for tax year 2026/27 will be due on January 31, 2028
If a business is trading at April 5, 2025 it will need to comply with the new rules if it exceeds the £50k threshold in the 2024/25 tax year (i.e. it will be based on what is filed on January 31, 2026).
Any new business that exceeds the threshold for the first time must comply with MTD IT from the start of the third tax year (i.e. if they exceed the threshold in 2026/27, they will be required to comply from April 6, 2029).
If the relevant period is less than 12 months, a determination must be made proportionally on a time or other just and reasonable basis.
Dates
Standard quarters will be:
April 6 to July 5
April 6 to October 5
April 6 to January 5
April 6 to April 5
Businesses will be able to elect for calendar months:
April to June
April to September
April to December
April to March
(note - quarterly updates are cumulative)
Deadlines for quarterly updates are fixed as:
August 7
November 7
February 7
May 7
(electing for calendar months will give an additional 5 days to file)
Updates can be submitted up to 10 days early where the information for the quarter is complete.
Reporting Details
As per the current self-assessment system, businesses with annual turnover below the VAT threshold are eligible to use the 'three-line accounts' method - reporting simply income, expenses and profit or loss.
Separate returns must be submitted for each business. For example, a sole trader with a separate property business will submit eight quarterly updates.
If a landlord has income from both UK and overseas properties, this will be treated as two single businesses and eight quarterly updates will need to be submitted.
It will be possible to amend earlier updates to correct omissions, duplications or other errors.
After the fourth quarterly update there will be a year end finalisation process which will bring all the submitted information together.
Leaving MTD IT
To avoid frequent changes as income fluctuates, a taxpayer will leave MTD IT when gross income falls below the threshold for three consecutive years.
Points to note:
As MTD is a new policy taxpayers must be aware that the rules and legislation may continue to change.
This document is a simplified helpsheet and careful research should be completed if you are unsure.
Need more information? Contact us today to find out more.
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