MTD for Income Tax – are you affected

If you have not yet checked whether you need to use Making Tax Digital (MTD) for Income Tax, now is the time to urgently see if you are affected. The Income Tax reporting requirements for some self-employed individuals and landlords will change significantly from 6 April 2026.

MTD for Income Tax changes the traditional annual tax return into a system of quarterly digital updates, requiring compatible software to keep records and communicate with HMRC.

Who is affected in April 2026?

The first phase of MTD for Income Tax applies to self-employed individuals and landlords with a combined gross income from these sources of more than £50,000 per year. It is important to note that this threshold applies to your gross income (turnover or total rental income), not your profit.

If you have both a self-employed business and property income, you must add the gross income from both sources together. If the total exceeds £50,000, you will be mandated to join MTD for Income Tax from 6 April 2026.

Who is affected later?

The second phase will begin on 6 April 2027, applying to self-employed individuals and landlords with a combined gross income of more than £30,000. The government has stated that it will review the needs of smaller businesses (those earning under £30,000) before deciding whether to mandate them into the system.

Currently, general partnerships, limited liability partnerships (LLPs), and trusts are excluded from the initial rollout, although they will likely be brought into the MTD regime at a later date.

What you need to do

If you fall into the mandated group for April 2026, you must take action now to ensure you are ready:

• Keep digital records: You must maintain digital records of all your business income and expenses. Paper records will no longer be sufficient.
• Use compatible software: You must use MTD-compatible software to keep your records and submit your updates to HMRC. You cannot use HMRC's online services to file these updates manually.
• Submit quarterly updates: You will need to send a summary of your business income and expenses to HMRC every three months.
• Submit an End of Period Statement (EOPS): At the end of the tax year, you must submit an EOPS to finalise your business income and claim any reliefs or allowances.
• Submit a Final Declaration: You must submit a Final Declaration, bringing together all your income (including non-business income, such as savings or dividends) to calculate your final tax liability.

Transitioning to MTD requires a shift in how you manage your day-to-day finances. If you currently rely on spreadsheets or paper records, moving to cloud-based accounting software is the most effective way to ensure compliance and streamline the reporting process.