Making Tax Digital for income tax – What you need to know

What is MTD?

The UK Government first introduced MTD in April 2020. MTD aims to enhance tax transparency and accuracy, helping businesses and individuals stay on top of their accounting and reporting obligations.

MTD for VAT was the first initiative rolled out, requiring businesses that exceed the VAT threshold to establish a digital tax account and file quarterly returns online.

What is MTD for Income Tax?

MTD for Income Tax requires certain taxpayers, such as sole traders and landlords, to keep digital records and submit quarterly updates to HMRC using compatible software.

Who must comply with MTD for Income Tax?

• From 6 April 2026, if your total gross income from self-employment and/or property exceeds £50,000.
• From 6 April 2027, the threshold drops to £30,000.
• From 6 April 2028, it’s reduced further to £20,000.

What counts toward the income threshold?

Only gross income from self-employment and property. Employment income, pensions, or dividends do not count toward the threshold.

How can you prepare for MTD for Income Tax?

If your records are already in a digital format on a cloud-based app, then the change should be simple. The only significant adjustment is that you’ll be required to upload quarterly reports to HMRC digitally.

How to comply with MTD for Income Tax?

• Keep digital records of income and expenses.
• Submit quarterly updates to HMRC.
• Finalise your tax return annually through MTD-compatible software.

Are there exemptions to MTD for Income Tax?

• Trusts, estates, and some partnerships.
• Individuals with digital exclusion (e.g. due to age, disability, or remoteness).
• Those without a National Insurance number.