As part of the 2025 Spring Statement, an updated policy on Making Tax Digital (MTD) for Income Tax (IT) was released. MTD was first announced by the government in 2025, with the purported aim of modernising the tax system through digital record-keeping and reporting. Although MTD for VAT has been in place for a while now, the commencement date for income tax has been pushed back on several occasions.
Following the latest policy document, however, it does appear that the previously announced phased introduction starting from April 2026 is set to go ahead.
Thresholds and timing
MTD for IT will be implemented in phases as follows:
• From April 2026: sole traders and landlords with combined gross annual business or property income exceeding £50,000 (as per their 2024/25 return).
• From April 2027: The threshold will be lowered to include those with combined annual business or property income of more than £30,000.
• From April 2028: The government announced at the spring statement plans to further extend MTD for IT to those with combined qualifying income over £20,000.
Partnership income will not count towards the threshold, but such individuals could still be required to comply with MTD if they have other qualifying income above the relevant threshold. No dates have been announced as to when partnerships or companies will be brought into the regime.
Certain groups will be excluded from having to comply with MTD for IT including taxpayers that have a power of attorney and ministers of religion. Also, anyone that has to complete a SA109 schedule as part of their tax return (e.g. non-UK residents) will not be required to comply with MTD until April 2027, even if their income is above the £50,000 threshold.
Requirements
Under MTD for IT, affected individuals must:
1. Keep digital records of income and expenses using compatible software.
2. Submit quarterly updates to HMRC of income and expenses relating to their self-employment or property rental, ensuring that tax information is as current as possible.
3. Submit a year-end declaration, finalising their tax position at the end of the tax year, including any necessary adjustments and to include any additional income sources.
For those mandated in to MTD for IT from April 2026, the first quarterly update will apply to the period 6 April 2026 – 5 July 2026 (or 1 April 2026 – 30 June 2026 if opting to report on a calendar quarters basis), with a submission deadline of 7 August 2026.
The deadline for making the year-end declaration will be 31 January following the tax year, in line with the current tax return deadline. Payment dates for tax liabilities will also remain the same as under current self-assessment.
HMRC Communication
HMRC has begun writing to clients who will be affected by the upcoming changes. These letters provide information on the new requirements and encourage early preparation. If you are unsure of your requirements, please do get in touch with your usual tax contact.
Summary
MTD for IT represents a significant shift in how tax is administered in the UK and although originally hailed as the end of the tax return, actually requires a minimum of five filings to HMRC per year (more if an individual has different sources of income).
Preparing early will be key as well as determining what support you may require from a professional adviser i.e. just with the year-end declaration or assistance with quarterly submissions too, as well as any changes that may be required to your reporting systems and software.
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