Making Tax Digital for income tax, What is it and what do you need to know?

What is Making Tax Digital for income tax?

Making Tax Digital (MTD) for income tax is part of HMRC’s ongoing effort to modernise the UK tax system.  It is a government initiative to implement a fully digital tax system in the UK, where taxpayers keep digital records and use MTD compatible software to make tax submissions electronically.

It will affect individuals who are self employed and landlords and is being rolled out in phases, beginning from 6 April 2026.  If this applies to you it's important to start preparing now.

Who will need to use MTD for income tax?

You’ll need to use MTD for income tax if all of the following apply:

• You’re an individual registered for self assessment
• You receive income from self employment, property, or both
• Your total gross income from those sources is more than £30,000 a year

Your qualifying income is the total gross income that you get in a tax year from self employment and property.

When do you need to start?

MTD for income tax will become mandatory in phases, starting from 6 April 2026.  You may be able to sign up now voluntarily as part of the HMRC beta testing.  You do not currently need to use the service if your qualifying income is £30,000 or less.

MTD for income tax becomes mandatory in phases:

April 2022 - MTD for VAT applies to all VAT registered businesses

April 2026 - MTD for income tax will apply to self employed individuals and landlords with income over £50,000

April 2027 - MTD for Income Tax will apply to self employed individuals and landlords with income over £30,000

In 2029, MTD for income tax will apply to self employed individuals and landlords with income over £20,000 by the end of this parliament

HMRC will review your tax return and notify you if you are required to join MTD. You (or your accountant) will then need to use compatible software and sign up for the MTD system.

Who will need to use the service from 6 April 2026

You’ll need to use MTD for income tax from 6 April 2026 if all of the following apply. You:

• are an individual registered for self assessment
• get income from self employment or property or both, before 6 April 2025
• have a qualifying income of more than £50,000 in the 24/25 tax year

What will happen by 6 April 2026:

1. You need to submit your return for the 24/25 tax year by 31 January 2026.
2. HMRC will review your return and check if your qualifying income is more than £50,000.
3. If it is, HMRC will write to you and confirm that you must start using MTD for income tax by 6 April 2026. If we are your agent, we can do this on your behalf.
4. You, or if we manage your bookkeeping us, must find software that works with MTD for income tax and authorise it.
5. You or us, if we are your agent must sign up for MTD for income tax.

You can use HMRC’s checker tool to see if you need to use the service and when you’ll need to start by using the link https://tax.service.gov.uk/guidance/check-if-you-need-to-use-making-tax-digital-for-income-tax    

What if you become self employed or a landlord after 6 April 2026?

You won’t need to use MTD straight away. You’ll start after you’ve submitted your first tax return, but you can voluntarily sign up before that here:

https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax

Are there any exemptions?

Some individuals may be automatically exempt. If you're not but believe it’s unreasonable or impractical to use MTD software, you can apply for an exemption (once the application process opens).

What should you do now?

• Check if your income meets the £30,000 or £50,000 threshold
• Speak to us about compatible software and when you should implement this…we have packages that can help you get up and running quickly.
• Consider voluntarily signing up early to familiarise yourself with the system

If you have any questions or queries, please do get in touch with your Swindells partner who will be able to advise you further.