What Is MTD for Income Tax and Why It Matters
“Making Tax Digital for Income Tax”, or MTD for ITSA, changes how Self Assessment works for individuals earning through self-employment or property. Instead of once-a-year filing with paper or basic digital returns, eligible taxpayers must now keep digital records and report income and expenses quarterly through approved software. (gov.uk)
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Who’s in Scope and When
| Tax Year | Qualifying Income Threshold | Applies to Sole Traders / Landlords with combined income from business and property |
|---|---|---|
| From 6 April 2026 | Over £50,000 | In force now (gov.uk) |
| From 6 April 2027 | Over £30,000 | Threshold drops next year (gov.uk) |
| From 6 April 2028 | Over £20,000 | Broader group enters scope (gov.uk) |
Some individuals are exempt, including:
- Ministers of religion,
- Lloyd’s underwriters,
- Non-UK resident entertainers with no other qualifying income. (gov.uk)
Obligations Under MTD (For Those In Scope)
- Use software that’s MTD-compatible to keep digital records of all income and expenses. (gov.uk)
- Send quarterly updates in fixed periods—either aligned to your accounting period or calendar quarter. (gov.uk)
- File end-of-year tax return through the software. Register for MTD if not already. (gov.uk)
- For record-keeping: detailed categories are required unless you’re a relevant person below VAT registration threshold—some simplifications apply. (gov.uk)
Example: Applying MTD in Real Life
Jenny, a landlord who earns £55,000 annually in property rent plus £10,000 from a small online shop. Her qualifying income is £65,000. From 6 April 2026, Jenny must keep digital records, send quarterly updates, file her Self Assessment through MTD-compatible software.
Meanwhile, Sam has rental income of £35,000 and earns nothing from business. From April 2026 he is not yet mandated (threshold is £50,000), but he will be from April 2027 when threshold drops to £30,000.
Tips to Adapt Smoothly
- Choose a reliable software provider early—look for good support, compatibility, and user-friendly dashboards.
- Move accounting records online now if you’re currently paper-based.
- Create reminders for quarterly deadlines to avoid late submission penalties. (gov.uk)
- Make sure your data is properly categorized to avoid surprises—especially property finance costs or joint property income. (gov.uk)
What’s Next: Threshold Reductions and Broader Scope
As mentioned, thresholds will move down in stages:
- April 2027: from £50,000 → £30,000,
- April 2028: from £30,000 → £20,000. (gov.uk)
Stay aware of exemptions; some groups retain permanent or delayed exclusions depending on legislative updates.
Key Points to Take Away
- MTD for Income Tax has been live since 6 April 2026 for those over £50,000 qualifying income.
- Quarterly updates and digital record-keeping are here to stay.
- Threshold changes in 2027 and 2028 widen the scope.
- Start adopting compatible software and good digital habits if you're approaching the thresholds.