Making Tax Digital FAQs

What is MTD?

Making Tax Digital (MTD) was brought in to support HMRC’s plans to digitalise the UK Tax system. It is a key part of the government’s Tax administration Strategy to help reduce the tax gap and bring the tax system closer to real time by requiring businesses and individuals to keep digital records and use MTD compatible software to submit updated accounts every quarter.

By April 2022 all VAT registered businesses had to use MTD for VAT and that is soon to be rolled out for Income Tax as well.

MTD for Income Tax

Making Tax Digital for Income Tax (MTD ITSA) was initially announced in 2015 and intended to be in place by 2020. Its intention is to replace the ‘tax return’ for self-employed individuals. MTD ITSA has now been delayed to 6 April 2026 if you are self-employed or a landlord and have an annual business or property income of more than £50,000. If you have an annual business or property income of more than £30,000 you do not need to follow the requirements for MTD ITSA until April 2027.

The date that MTD for Income Tax will apply to partnerships has not yet been announced.

What will happen in April 2026?

All self-assessment tax returns for the 2024 -2025 tax year will be submitted through the usual methods by 31 January 2026. HMRC will then use these returns to check if your qualifying income is more than £50,000. If it is, HMRC will write to you and confirm that you must start using MTD for Income tax by 6 April 2026. You, or your agent on your behalf, must sign up for MTD ITSA and start using compatible software to process your records and complete your quarterly returns.

How do you choose compatible software?

The software businesses use to comply with MTD must be capable of:

· Keeping and maintaining specified records

· Preparing Self-Assessment returns using the information maintained in those digital records

· Communicating with HMRC digitally through the Application Programming Interface (API) platform.

HMRC provides a list of compatible software on their website, they do not endorse or recommend any one product of software. Find software that works with Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)

For More information please see HMRC’s policy paper on Making Tax Digital: Overview of Making Tax Digital – GOV.UK (www.gov.uk)

If you have any queries on any of the above or have your own questions please give us a call and ask for Mike or Emma on 01454 419262.