MTD for Income Tax: what it means for your business
Making Tax Digital for Income Tax will change how landlords and sole traders keep records and file returns. Here's what it means and what to do now.
Making Tax Digital for Income Tax, explained
Making Tax Digital (MTD) for Income Tax requires unincorporated landlords and self-employed individuals to keep digital records and file quarterly updates using MTD-compatible software — instead of completing an annual Self Assessment return.
It’s the same principle as MTD for VAT, which has applied to VAT-registered businesses since 2019, applied to income tax.
When does it start?
- From 2026/27: landlords and self-employed individuals with gross income over £50,000
- From 2027/28: those with gross income above £30,000
- From 2028/29: a further extension is planned, with no minimum threshold yet confirmed
If you don’t meet these thresholds yet, the odds are you will at some point — so early preparation is worthwhile.
What changes?
Digital record keeping
Your income and expenses will need to be recorded digitally — either in software, a spreadsheet that connects to MTD-compatible software, or a full accounting package.
Quarterly updates
Four times a year you’ll send HMRC a summary of your income and expenses for that quarter. This replaces much of the year-end burden: by January, your tax bill for the year will already be mostly calculated.
The end of the annual return
An End of Period Statement replaces the annual Self Assessment return for in-scope businesses, confirming income and expenses for the year. Individuals with other income (for example, capital gains) will still file a final declaration.
Is there anything good about it?
Yes. Quarterly submissions mean no more digging out a year’s worth of paperwork every January. Your tax position becomes predictable, which makes planning and saving for your bill far easier. And because the numbers are updated throughout the year, fewer surprises at the end.
What should you do now?
- Choose your software. Picking MTD-compatible software early means your records are compliant from day one.
- Get your bookkeeping organised. Clean, consistent records make the transition painless.
- Talk to us. We can help you choose software, set up your digital records and handle your quarterly submissions for you.
If you’re not sure whether you’re in scope, book a free consultation and we’ll map out exactly what applies to you.
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