As the 6 April launch of Making Tax Digital for Income Tax (MTD for IT) approaches, taxpayers are looking for clear, practical advice to ensure compliance and tackle any challenges ahead. Looking at recently published information from HM Revenue & Customs (HMRC), it seems that the testing phase has proven valuable in identifying potential stumbling blocks and providing additional support – helping to ensure a smoother transition for those joining the scheme.
Approximately 5,000 taxpayers have enrolled in MTD for IT testing, with 3,000 actively submitting quarterly updates. The current priority is on testing both quarterly submissions and end-of-year return processes, as these are key in ensuring accuracy and compliance. Guidance published this month has a particular focus on the specifics of accounting period changes, as confusion over calendar-quarter reporting has been identified as the primary reason for failed quarterly submissions.
Consider your accounting period
By default, your software will use an accounting period aligned with the tax year (6 April to 5 April) for quarterly updates.
If your accounting period ends on 31 March, and your software allows it, you can choose calendar quarter updates – quarterly updates that end on the last day of the month. This simplifies record keeping.
Calendar quarter elections must be made before your first quarterly update and will apply for the full tax year. Once the tax year has started, you cannot switch to calendar quarter updates.
For the 2026–2027 tax year, there is a 5-day gap (1–5 April) that must be reported separately.
Early sign-up
Self-employed individuals or landlords with combined annual business or property income over £50,000 – in the year ended 5 April 2025 tax return – must sign up for MTD for IT from 6 April 2026.
HMRC will check your eligibility based on the information you provide. It is advisable to sign up as early as possible to avoid any last minute time pressures. Once registered, no further action is required until after 6 April, when you will need to start keeping digital records.
Preparing to join
To sign up for MTD for IT, you must:
- Be registered for Self Assessment; and
- Have submitted a tax return in the last two years.
Review the main steps and the order to tackle them, including:
- Check if you need to sign up: Review your qualifying income to confirm whether you are required to use MTD for IT by 6 April 2026.
- Choose compatible software: If you need to sign up, your next priority is finding software that is compatible with MTD for IT. Our Software Solutions Guide outlines the options and helps you select the best solution for your needs.
- Sign up for MTD for IT: Once you have your software in place, you can sign up to MTD for IT with HMRC.
- Get familiar with digital record keeping and reporting: After signing up, you will need to:
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- Keep digital records of your business or property income;
- Submit quarterly updates;
- Make any necessary adjustments; and
- Complete and submit a final declaration.
Any necessary adjustments, including declaring all sources of income and finalising your tax affairs by submitting a final declaration are similar to the current Self-Assessment process. If we currently complete your tax return, this step will be carried out by us as usual.
Our Making Tax Digital for Income Tax guide includes more comprehensive details on what is required and some frequently asked questions.
Budget 2025 updates
Budget 2025 included some positives in terms of MTD for IT. Most notably, HMRC will not apply penalty points for late quarterly updates for the first tax year (2026 to 2027). This concession is designed to ease the transition as the new regime is adopted. However, quarterly updates must still be submitted before the end-of-year tax return can be filed.
This penalty easement will not apply to the end of year tax return for 2026 to 2027 (due 31 January 2028). In the first year of the new system, taxpayers will have 30 days to pay before a late payment penalty is applied.
Certain taxpayers have been deferred from joining MTD for IT until April 2027, including:
- Recipients of trust and estate income;
- Individuals using averaging adjustments (e.g., farmers and creative artists);
- Recipients of qualifying care income; and
- Non-UK resident foreign entertainers or sportspeople.
Additionally, taxpayers under deputyship will also be exempt from MTD for IT.
How M+A Partners can help
We understand that Making Tax Digital for Income Tax (MTD for IT) can feel daunting. Our experienced team is here to guide you every step of the way. We can:
- Help you choose and set up MTD-compatible software;
- Provide training on using the software effectively;
- Assist with submitting quarterly updates and End-of-Period Statements; and
- Ensure you remain compliant with HMRC requirements.
If you have any questions about MTD for IT, or need advice on registration or software options, please contact your usual M+A Partners representative or get in touch with us using the details below.
