Making Tax Digital for Income Tax (MTD IT)
April 2, 2025
Making Tax Digital for Income Tax (MTD IT) – Obligation confirmed from April 2026
Making Tax Digital for Income Tax (MTD IT) – Obligation confirmed from April 2026
What is it and why is it happening?
Making Tax Digital for Income Tax (MTD IT) aims to reduce the tax gap by enabling more accurate and timely submissions through digital tools. It is reported that every year, errors and poor record-keeping practices contribute to the UK’s tax gap. By requiring businesses to keep digital records, HMRC is bringing all tax processes into one digital environment, making it easier for agents to manage client tax affairs under a single system.
Who is impacted?
Individuals with combined income from self-employment and/or property over the relevant thresholds will need to comply with the new rules.
MTD IT starts in April 2026 for those with qualifying income over £50,000.
What is ‘qualifying income’?
The term qualifying income refers to your gross income, before expenses and tax.
When do the changes come into effect?
April 2026 – Mandatory for individuals with combined gross income over £50,000 from self-employment and/or property.
April 2027 – Mandatory for individuals with combined gross income over £30,000 from self-employment and/or property.
April 2028 – Mandatory for individuals with combined gross income over £20,000 from self-employment and/or property.
What are the changes?
If you meet the criteria, three main areas must be complied with are:
1. Quarterly submissions – you must submit quarterly income and expenditure submissions to HMRC
2. Digital record keeping – HMRC requires that you maintain digital records of business income and expenses
3. Use MTD-Compliant software – You must make quarterly submissions using approved MTD software. You will no longer be able to file on paper or solely through HMRC online tax return.
How do I know if I am over the threshold?
The final status for each tax year will be based on the tax return information due 31st Jan before the 6th April start date. Therefore, any requirement to comply with MTD IT from April 2026 will be based on the 24/25 tax return information (6th April 2024 – 5th April 2025), due for submission by 31 January 2026. This means the submission of your 24/25 return in January 2026 will identify for certain whether you meet the criteria. HMRC will also be contacting individuals directly from April 2025 who currently have qualifying income over the relevant threshold, to notify them of the changes ahead. Further letters will be issued in February 2026, after the submission of the 24/25 tax return.
Can I opt out?
No, these changes are part of legislation and therefore mandatory unless an exemption applies. For a full list of exclusions, please see this link as outlined by HMRC – https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax . HMRC will also be introducing a new points-based penalty system. Penalty points will be accrued for each late submission and a financial penalty will be imposed once a points threshold has been met.
How can Alexander Sloan help?
We are here to support you and ensure you meet your submission obligations, whether you are an existing or prospective client. If you have any concerns or questions regarding Making Tax Digital for Income Tax, please reach out to your regular Tax advisor at Alexander Sloan or contact us and we would be happy to discuss.