What Is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax changes how qualifying sole traders and landlords keep records and report information to HMRC. Instead of dealing with everything after the tax year, they must maintain digital records and send updates during the year.
Who Must Join?
MTD for Income Tax became mandatory from 6 April 2026 for individuals with combined qualifying gross income from self-employment and property above £50,000.
The threshold falls to £30,000 from April 2027. The test considers gross qualifying income before expenses and combines relevant sole-trader and property income. Salary, pensions and dividends are not included in this particular threshold.
HMRC normally reviews income reported on an earlier Self Assessment return to decide whether someone must join. Exemptions and deferrals can apply in limited circumstances.
What Must Be Done?
A person within MTD generally needs to:
- Keep digital records of business and property income and expenses
- Use software that works with MTD for Income Tax
- Submit quarterly summaries to HMRC
- Complete the year-end process and finalise their overall tax position
The standard quarterly deadlines are 7 August, 7 November, 7 February and 7 May, although a calendar-quarter election may change the periods covered.
Quarterly updates are not four complete tax returns. Accounting adjustments, reliefs and other personal income still need to be considered when the year is finalised.
Each business and property business normally has its own digital records and updates. Jointly owned property, multiple trades and accounting periods can make the setup more complicated. The taxpayer remains responsible for the information even where an accountant submits updates as agent.
Does MTD Change When Tax Is Paid?
MTD changes record keeping and reporting. It does not automatically replace the normal Self Assessment payment dates. Tax is still generally paid by 31 January, with payments on account also due on 31 January and 31 July where applicable.
Preparing for MTD
Do not wait for the first quarterly deadline. Choose suitable accounting software, separate business and personal transactions, capture receipts digitally and establish regular bookkeeping.
GMS Accountants supports sole traders and landlords in Cambridge and Nottingham with software, quarterly updates and year-end Self Assessment. Contact us to check whether MTD applies to you.
