From April 2026, HMRC will introduce Making Tax Digital for Income Tax  (MTD for IT), a major change affecting self-employed individuals and landlords earning over £50,000. If you fall into this category, you’ll need to switch to digital quarterly tax reporting. Here’s everything you need to know and how to prepare.

What is Making Tax Digital (MTD) for Income Tax?

Making Tax Digital (MTD) is HMRC’s initiative to modernise the tax system by requiring individuals to keep digital records and file tax information online more frequently.

MTD for Income Tax applies to self-employed individuals and landlords who meet the income threshold. Instead of filing one Self-Assessment tax return per year, you’ll submit quarterly updates as well as your tax return at the year-end.

Who does it apply to?

• Self-employed individuals earning over £50,000 (from April 2026)
• Landlords earning over £50,000 (from April 2026)
• From April 2027, those earning over £30,000 will also need to comply

Who is exempt?‍

Those who are digitally excluded (e.g., due to disability or lack of internet access)

How Do You Qualify for MTD for ITSA?

You’ll need to follow MTD rules if your total gross income from self-employment and/or property rental exceeds £50,000 in the 2025/26 tax year.

• Example 1 - Self-Employed: A freelancer earning £55,000 in 2025/26 will need to comply with MTD from April 2026.‍
• Example 2 - Landlord: A property owner receiving £52,000 in rental income will need to follow MTD rules from April 2026.‍
• Example 3 - Mixed Income: If you earn £40,000 from self-employment and £15,000 from rental property, your total taxable income is £55,000, meaning MTD applies to you.

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If your income is below £50,000, you won’t need to join MTD in 2026, but from April 2027, the threshold will drop to £30,000.

📌 What to check now: If you are close to the £50,000 threshold, review your income sources to see if you’ll need to register for MTD.

How Will MTD for Income Tax Work?

Instead of filing a single Self-Assessment return once a year, you’ll need to:

1. Keep Digital Records

• You must maintain accurate, real-time digital records of income and expenses using compatible software.
• Spreadsheets alone won’t be compliant unless linked to bridging software.

2. Submit Quarterly Updates

• Every three months, you’ll send income and expenses to HMRC via MTD-compatible software.
• This helps track tax liability throughout the year.

3. Submit a Final Declaration

• Once all adjustments are made, you’ll submit a Final Declaration, confirming all income sources and paying any tax due.

What does this mean for you?

Instead of one big tax return in January, you’ll be reporting income and expenses four times a year and finalising your tax at the end of the tax year.

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Key Deadlines for MTD for ITSA

📅 Quarterly reporting deadlines (example for 2026/27 tax year):

Q1 (April – June): Submit by 7 August 2026

Q2 (July – September): Submit by 7 November 2026

Q3 (October – December): Submit by 7 February 2027

Q4 (January – March): Submit by 7 May 2027

Final Declaration (Self-Assessment deadline): 31 January 2028

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How You Should Prepare for MTD for Income Tax

1. Choose MTD-Compliant Accounting Software

HMRC-approved options include: Xero, QuickBooks, FreeAgent, Sage, DEXT Solo. Spreadsheets alone won’t be MTD-compliant unless you use bridging software

📌 What to do now: If you don’t already use accounting software, consider switching to one that integrates with MTD, and get ahead of the curve and get onto it now, so you have time to learn the ropes and understand how it will work.

2. Keep Digital Records from Now

Digitise receipts, invoices, and expense records through a tool like DEXT Prepare and Solo or FreeAgent Smart Capture. Automate bookkeeping by linking bank accounts to accounting software.

📌 What to do now: Set up a habit of real-time digital record-keeping to avoid last-minute compliance issues.

3. Understand Your Quarterly Tax Payments

Since tax updates are submitted quarterly, you’ll have a better idea of your tax bill throughout the year. This can help avoid unexpected tax bills and allow better financial planning.

📌 What to do now: Work with an accountant to estimate how quarterly submissions will affect your cash flow.

4. Check If You Need to Register for MTD

HMRC may automatically register you, but if not, you’ll need to sign up for MTD via your Government Gateway account.

📌 What to do now: Ensure your Government Gateway account is set up and ready for MTD registration.

5. Work with a Tax Specialist

Tax rules will become more complex under MTD, so getting advice early is key.

A tax advisor can help you stay compliant, optimise tax efficiency, and avoid penalties.

📌 What to do now: Book a consultation with Layers Accountancy to ensure you’re fully prepared for MTD.

Frequently Asked Questions ❓‍

What happens if I don’t comply with MTD?

HMRC will introduce penalties for non-compliance, including fines for late filings. Staying compliant is crucial.

Can I still use spreadsheets?

Yes, but only with bridging software to ensure compatibility with HMRC’s system.

What if my income drops below £50,000 after registering for MTD?

Once you’re required to join MTD, you’ll remain in the system unless HMRC grants an exemption.

Will I still need to file a Self-Assessment tax return?

No. Once MTD is fully in place, you’ll only submit quarterly reports, an End of Period Statement, and a Final Declaration.

Get Ready for MTD with Layers Accountancy

Need help making the switch? At Layers Accountancy, we provide expert guidance on MTD-compliant software, bookkeeping support to keep your records digital and accurate.

Contact us and stay ahead of MTD for Income Tax!

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