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What is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is a key initiative introduced by HM Revenue and Customs (HMRC) to modernise the UK tax system. From 6 April 2026, self-employed individuals and landlords with a total gross income of over £50,000 from self-employment and property will be required to comply with MTD for Income Tax rules.

This means maintaining digital records and submitting tax returns using MTD-compatible software. The goal is to improve accuracy, reduce errors, and streamline the tax reporting process.

, MTD Income Tax Digital

Who Needs to Comply?

Mandatory Compliance

From 6 April 2026, MTD for Income Tax will be mandatory for individuals whose total gross income from self-employment and property (UK and overseas) exceeds £50,000. This includes:

  • Self-Employed Individuals – Those whose combined income from all self-employment activities and rental properties exceeds £50,000 must maintain digital records and submit quarterly updates via MTD-compliant software.
  • Landlords – Those with total gross rental income exceeding £50,000, whether from UK or overseas property, will also need to comply.

Phased Implementation

From 6 April 2027, MTD for Income Tax will extend to individuals with total gross income between £30,000 and £50,000 from self-employment and property.

Possible Future Changes

HMRC is reviewing whether MTD should apply to individuals earning less than £30,000 from self-employment and property in future phases.

Individuals within these income thresholds should start preparing by adopting MTD-compliant software and ensuring their record-keeping processes align with the new requirements.

, MTD Income Tax Digital

How to Prepare for MTD for Income Tax

All self-employed individuals and landlords within the MTD threshold must keep digital records of their income and expenses using MTD-compliant software.

Instead of filing a single annual tax return, businesses must submit records quarterly using HMRC-approved software. Examples of MTD-compliant software include:

  • Xero
  • QuickBooks
  • FreeAgent
  • Other HMRC-approved solutions

Anro Accounting Solutions can advise on the best software based on your business needs.

Under MTD for Income Tax, taxpayers must submit quarterly updates to HMRC, summarising income and expenses. This provides a more real-time view of tax liabilities.

At the end of each tax year, a Final Declaration (replacing the current Self-Assessment return) must be submitted, confirming all tax information is accurate and complete.

To ensure compliance, all tax data transfers must be conducted using digital links—copying and pasting between records is not permitted.

Taxpayers can voluntarily sign up before the April 2026 deadline, allowing access to HMRC’s Making Tax Digital Customer Support Team for guidance and testing.

Benefits of Making Tax Digital for Income Tax

Streamlined Tax Submissions – MTD replaces annual tax returns with more frequent, automated reporting, reducing last-minute tax filing pressure.

Improved Accuracy – Digital record-keeping reduces errors in tax reporting, helping prevent penalties and HMRC investigations.

Real-Time Tax Insights – Quarterly reporting allows taxpayers to track tax liabilities throughout the year, aiding better financial planning.

Compliance with HMRC Requirements – Avoid penalties by staying compliant with HMRC’s MTD for Income Tax regulations.

Better Business Decisions – Regular financial updates help business owners and landlords make informed decisions based on real-time financial data.

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