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

What is MTD?

The UK Government first announced MTD in 2015 as part of its strategy to modernise the tax system as well as improve transparency and efficiency in tax administration. Its overarching aim is to reduce errors and help businesses and individuals maintain accurate and timely digital records.

The first phase of the programme, MTD for VAT, became mandatory in April 2019 for VAT‑registered businesses with taxable turnover above the VAT threshold. The next stage of the digital rollout is Making Tax Digital for Income Tax, which will come into effect from 6 April 2026.

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-recognised 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.