Making Tax Digital for Income Tax

+ Sole traders and landlords with annual combined business or property income of more than £50,000 from 6 April 2026.

+ Those with annual combined business or property income of more than £30,000 from 6 April 2027.

+ Those with annual combined business or property income of more than £20,000 from 6 April 2028.

Business partnerships will be excluded for now, but it is intended that MTD for IT will be rolled out to them in the future. HMRC have not yet issued guidance on when this will happen.

HMRC have made the decision not to introduce MTD for Corporation Tax. 

1. Use Compatible Software
We can help guide you on this point, and if you are not able to maintain your own digital records, we may be able to implement a system using excel spreadsheets and ‘bridging software’ to comply with HMRC’s requirements.

2. Keep Digital Records
You must maintain digital records of your income and expenses using MTD-compatible software. This software will allow you to record transactions and prepare your tax submissions.

3. Submit Quarterly Updates
You will need to send quarterly updates of your income and expenses to HMRC through the software. These updates will provide a summary of your business activity for the quarter and excludes any tax or accounting adjustments.

4. Submit a Final Declaration
At the end of the tax year, you will still need to make final adjustments, declare all sources of income and finalise your tax affairs by submitting a final declaration. This is similar to the current Self-Assessment process and will be done digitally.

Quarterly updates are required for standard quarters, irrespective of a business’s accounting period.

The standard quarters are:

+ 6 April to 5 July
+ 6 July to 5 October
+ 6 October to 5 January
+ 6 January to 5 April

The deadlines for quarterly updates are 7 August, 7 November, 7 February and 7 May following the end of the relevant quarter.

31 January 2027 is the deadline to submit a Self Assessment tax return the usual way for 2025 to 2026

An MTD for Income Tax timeline is available here.

Your chosen software will help to:

+ Create, store and correct digital records of your business income and expenses;
+ Send quarterly updates; and
+ Submit a final declaration (this is similar to the current Self-Assessment process).

Most approved accounting software has the capacity to do all of the above – the exception being bridging software. Choosing accounting software that fulfils all the requirements of MTD for Income Tax will help to cut down on manual processes and reduce the administrative burden.

By selecting software from the HMRC-approved list, you can be sure that the software meets the technical and security requirements for submitting digital tax records.

HMRC’s software finder tool can help you identify compatible software that meets your specific requirements.

After the fourth quarterly update has been submitted, the year-end finalisation process can be completed.

This consists of two steps:

1. Complete the tax and accounting adjustments on each MTD business and submit these to HMRC; and

2. Bring together all sources of income (MTD and non-MTD income) that will be submitted to HMRC in place of the current Self-Assessment tax return. The deadline for this submission is 31 January following the tax year.

Essentially, the final declaration replaces the current annual Self-Assessment return. If we currently complete your tax return, the final declaration will be completed by us, ensuring that you both comply with HMRC’s rules and continue to be as tax efficient as possible.