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 and 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). Trustees and individuals without national insurance numbers are also automatically excluded. You can also apply to HMRC for exemption under digital exclusion grounds if compliance is unreasonable due to age, disability, location, or religious beliefs. In addition, MTD for IT will be postponed to 6 April 2027 for individuals where the following was included on their 2024/25 tax return:

• Averaging relief was claimed.
• Qualifying care relief was claimed (e.g. carers).
• Income was received from trusts or estates.
• SA109 supplementary pages were completed (generally applicable to non-UK residents) and where it is expected that they will be included again in the 2026/27 tax return.

If any of the above income was not included on an individual’s 2024/25 return but, is expected to be on their 2026/27 return, a temporary extension will also apply but this will not be automatic and will need to be requested from HMRC. Non-UK resident foreign entertainers or sportspersons will also need to apply for a temporary exemption regardless of whether they recorded such income on their 2024/25 tax return. There are a few other temporary automatic exemptions which will extend beyond April 2027, (commencement date yet to be confirmed) including ministers of religion, recipients of the married couple’s allowance or blind person’s allowance and Lloyd’s members.

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.