Your guide to Making Tax Digital for income tax: what do you need to know?

Overview

This is your guide to Making Tax Digital for Income Tax (MTD for IT) which represents a major shift in how individuals and landlords report income to HMRC. Instead of filing a single annual self-assessment tax return, affected taxpayers will need to keep digital records and submit quarterly updates using HMRC-compatible software, alongside an end-of-year tax return.

Who is affected?

MTD for IT applies to:

• individuals with rental income; and/or
• self-employed individuals

with combined gross income above set thresholds.

Start dates and thresholds

• 6 April 2026: Combined gross income (from rental and self-employment) over £50,000 (based on 2024/25 tax year).
• 6 April 2027: Combined gross income over £30,000 (based on 2025/26 tax year).
• 6 April 2028: Combined gross income over £20,000 (based on 2026/27 tax year).

Thresholds from 6 April 2029 onwards and relevant income to be included is yet to be confirmed.

Your obligations

From your start date you will need to:

• Maintain digital records for each business or property income source.
• Use MTD-compatible software for quarterly updates and the end of year tax return submissions.

Digital records must, in most cases, be on a transaction-by-transaction basis and should include the amount, date, and category of the income or expense.

Exclusions and exemptions

Partners of members of LLPs do not currently need to comply, unless they have other sources of relevant income (e.g. rental income received personally above the relevant threshold). Trusts and individuals without national insurance numbers are also excluded and the start date for non-residents is deferred until April 2027. You can also apply to HMRC for exemption under digital exclusion grounds if compliance is unreasonable due to age, disability, location, or religious beliefs.

Deadlines

Quarterly updates will need to be filed within one month and 2 days of the quarter end. For example, the first quarter from 6 April 2026 to 5 July 2026 will have a filing deadline of 7 August 2026. The end of year tax return deadline remains as 31 January following the end of the tax year. One quarterly submission is required for each source of income (e.g. if you have one sole trade and UK property income you will be required to file two separate quarterly updates each quarter).

Software requirements

You must use HMRC-approved software that:

• Creates digital records (e.g., links to bank accounts, scans receipts).
• Or connects existing records via bridging software.

HMRC have a software finder tool to help you find a software for your specific needs.

Penalties

A points-based penalty system will apply for late submissions. HMRC cannot directly enquire into quarterly updates but can levy penalties where digital records have not been maintained.

How Hazlewoods can help

Support options include:

• Fully managed: Bookkeeping, quarterly updates, and annual return.
• Partly managed: Quarterly updates and annual return.
• Self-managed: Annual return only.

Next steps

1. Confirm your start date.
2. Choose suitable software.
3. Create a personal tax account.
4. Sign up for MTD for IT or ask your adviser to assist.

Please get in touch if you are unsure of your obligations and the level of support you require.