Making Tax Digital (MTD), which has already been rolled out for VAT, is intended to improve the accuracy of business records and help ensure that individuals pay the right amount of tax.
Who it affects and when
MTD for Income Tax only applies to individuals with self-employment and/or property income and is being implemented in stages:
- from 6 April 2026, if annual self-employment and property income (taken together) exceeds £50,000
- from 6 April 2027, if annual self-employment and property income exceeds £30,000.
As announced in the Chancellor’s Spring Statement, the threshold will reduce further, bringing those with income over £20,000 into the regime from April 2028.
Other types of income (including employment and pension income and partnership income) are not taken into account, and MTD for Income Tax will not change how tax liabilities are calculated or when payments are due.
Obligations under MTD for Income Tax
Once within MTD for Income Tax, individuals will have to keep digital records and provide quarterly updates of their self-employment and property income and expenditure to HMRC.
Quarterly updates do not need to include accounting or tax adjustments, such as claims for capital allowances.
Instead, these can be made after the end of the tax year, when final business and property income figures will be reported alongside non-MTD income and expenses in a process similar to the current tax return.
Whether an individual is in MTD for Income Tax from April 2026 will depend on the figures reported on their 2024/25 tax return (due by 31 January 2026). To help individuals get ready, HMRC is currently writing to those whose 2023/24 returns showed relevant income over £50,000 to make them aware that they are likely to be affected.
If you would like to discuss how MTD for Income Tax will affect you, please chat with your usual Shipleys contact or one of our specialists shown on this page.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary.
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