What’s Changing with MTD for Income Tax
Starting 6 April 2026, sole traders and landlords in the UK whose gross income from self-employment and property is over £50,000 will be required to use HMRC’s Making Tax Digital (MTD) for Income Tax. (gov.uk) They must maintain digital records, use compatible software, and submit quarterly updates of income and expenses. Those with incomes above £30,000 must comply from April 2027, and incomes above £20,000 are expected to fall under the rules later when further thresholds are confirmed. (gov.uk)
Who Is Affected and Exemptions
- If your combined property and self-employment income exceeds £50,000 in the 2024-25 tax year, you'll be in scope from April 2026. (gov.uk)
- There are exemptions for certain individuals including those lacking a National Insurance number, qualifying due to age, disability, remoteness, or religious grounds. Full exemption rules are published by HMRC. (theguardian.com)
What You Need to Do Now
Clear Record-Keeping
- Switch to digital bookkeeping systems (e.g. Xero, FreeAgent, or bridging software)
- Keep records consistently—track all income, expenses, receipts, property-based income.
Software and Enrollment
- Identify MTD-compatible software and test it well before the deadline
- Sign up to HMRC’s testing programmes if available
- Agents should ensure clients are informed and ready; letters are being sent to those close to the threshold. (gov.uk)
Plan Quarterly Updates and Cash Flow Impacts
- Delivering quarterly updates means budgeting not just annually but throughout the year
- Review cash basis vs accrual basis for accounting where applicable
Example Scenario
Anna is a landlord and freelancer. In the year ending April 2025, her gross income from self-employment is £35,000 and from property £20,000; total £55,000. She must adopt MTD for Income Tax starting April 2026.
She needs software, digital record-keeping, submit updates every quarter—so, by July, October, January, and the final submission for year-end.
On the other hand, Ben, whose combined self-employment and property income is £28,000, is exempt until April 2027 (once crossing £30,000).
Why It Matters
- These changes aim to reduce errors in tax calculation and help taxpayers stay compliant throughout the year
- More frequent updates provide better visibility into your tax position—and may reduce surprises at filing time
- Failure to comply may result in penalties once fully in effect
Key Takeaways
- Check your income mix now—see if you meet or will soon meet thresholds
- Choose and implement compatible software early
- Update bookkeeping and workflows for quarterly reporting
- Seek advice if you're uncertain whether the rules apply to you or if you qualify for exemption
By being proactive, you can turn this change into an opportunity for greater clarity, improved financial control, and smoother year-end tax compliance.