WHO needs to prepare and WHEN?
Making Tax Digital (MTD) is HMRC’s major initiative to modernise the UK tax system by replacing annual paper-based returns with digital record-keeping and quarterly updates. While MTD for VAT is already mandatory for all VAT-registered businesses, the next major phase is MTD for Income Tax Self Assessment (ITSA), which begins in April 2026.
Who Needs to Prepare?
You are required to follow MTD for Income Tax rules if you are a sole trader or landlord (or both) registered for Self Assessment with a combined “qualifying income” (total gross income before expenses) that exceeds specific thresholds.
- Sole Traders: Applies whether you run one or multiple trades.
- Landlords: Includes residential landlords, furnished holiday lets, and joint property owners (based on your individual share of income).
- What is NOT included: Income from employment (PAYE), dividends, and savings interest do not count toward the qualifying threshold, though they must still be reported in your Final Declaration.
The Phased Rollout: Key Dates
Your mandatory start date depends on your qualifying income from previous tax years.
| Phase | Start Date | Qualifying Income Threshold | Assessment Year |
|---|---|---|---|
| Phase 1 | 6 April 2026 | Over £50,000 | 2024/25 Tax Year |
| Phase 2 | 6 April 2027 | Over £30,000 | 2025/26 Tax Year |
| Phase 3 | 6 April 2028 | Over £20,000 | 2026/27 Tax Year |
Note: Plans for MTD for Corporation Tax have been scrapped for the foreseeable future, so limited companies will continue to file annual CT600 returns as normal.
Preparation Milestones for 2026
If you meet the £50,000 threshold, here is your countdown to compliance:
- Now – April 2026: Review your 2024/25 income to confirm if you hit the £50,000 threshold. Choose HMRC-recognised software (e.g., Xero or FreeAgent) and start keeping digital records.
- 6 April 2026: Mandatory digital record-keeping begins.
- 7 August 2026: Deadline for your first quarterly update (covering 6 April to 5 July).
- 31 January 2027: Deadline for your final traditional Self Assessment return (for the 2025/26 tax year).
- 31 January 2028: Deadline for your first MTD “Final Declaration” and balancing payment for the 2026/27 tax year.
Exemptions
You may be exempt if you are “digitally excluded” due to age, disability, remote location with no internet, or religious objections. You must apply for an exemption and receive formal approval from HMRC.
Contact us today to discuss how we can help!