Making Tax Digital for Income Tax

Your Ultimate Guide to Making Tax Digital for Income Tax (or MTD IT for short): Everything You Need to Know

As you are likely aware, HMRC is introducing quarterly reporting for self employed and landlords who have qualifying income of over £50,000 from April 2026. This is called Making Tax Digital for Income Tax, or MTD IT as I will reference it from now on. This blog will give you all the information you need to understand what MTD IT is, how it will/might impact you and your business, and the next steps to complete now so you're ready to go when you reach the required threshold.

MTD IT is very new to everyone, so after attending every webinar under the sun (or at least feels like it!) this article compiles all the important need-to-know information in one place, so you don't have to spend your time searching for the answers.

What is Making Tax Digital for Income Tax?

How is this going to impact me?

Next Steps

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What is Making Tax Digital for Income Tax (MTD IT)?

MTD IT is a new reporting system that will become a legal requirement for some sole traders and landlords from 2026.

With HMRC's continued digitisation of taxes, they have been working on MTD IT for a long while, being pushed back multiple times, but it has got an official deadline, and it's coming up soon.

This is a very similar setup to the MTD for VAT changes that came in a few years ago. Qualifying individuals that meet the criteria will need to make quarterly submissions to HMRC, detailing the categorised income and expenditure for that period. These submissions will need to be made via an approved software.

Unlike VAT, every individual will have the same deadlines to meet. The quarters will line up with the tax year, and the quarters will run as follows:

• 6th April - 5th July, due by 7th August

• 6th July - 5th October, due by 7th November

• 6th October - 5th January, due by 7th February

• 6th January - 5th April, due by 7th May

In some cases, they can by based on calendar months (1st April - 30th June and so on) if the software allows, but the deadline of 7th remains the same. HMRC have advised to check with the software provider on eligibility for this.

HMRC are also making changes to the penalty system, lining this up with the same system used for VAT, and failing to submit on time will result in a penalty point. If you receive 4 penalty points, this will result in a £200 fine.

Here is a lovely picture of Leo, to break up the boring-ness and intensity of MTD IT, since he is super cute!

How is this going to impact me?

Its impact will depend on your circumstances, so first let me explain what the requirements are.

From April 2026, any sole trader and landlord that has qualifying income (this HMRC term is confusing, so I'll break that down for you below) over £50,000 will need to register and use MTD IT from 6th April 2026.

Qualifying income: this is the gross combined turnover of all sole trader income and property income.

For example, if you're a sole trader and your gross turnover (income before expenses deducted) is over £50,000, your caught.

Or, if you're a sole trader who has turnover of £35,000 and also has property turnover of £30,000 you'd have a total qualifying income of £65,000 and would be caught.

For 2026, HMRC are using the filed tax information from your 2024-25 tax return to determine your MTD IT requirement status, and will be sending out letters to those who will have a legal requirement. They have already sent out some letters to those who might have been affected, based on their 2023-24 returns.

You will also still be required to submit a Self Assessment Tax Return at the end of each year. This will include a summary of the quarterly updates as well as declaring any other income (PAYE, dividends etc) and deductions (student loan, child benefit etc). 

There is no change to the payment times for Self Assessment. You will not need to make any payments each quarter, this is just for reporting. The payment deadline of 31st January and 31st July (payment on account) will still apply as before.

HMRC have stated that the end of year Self Assessment will need to have digital links to your quarterly submissions, in order to be filed (and this is where using an accountant/bookkeeper will save you time, effort and money in the long run).

There are a number of reasons someone can apply for an exemption to MTD IT:

• If you are a partnership, or a partner in a partnership

• Impractical for you to use software to keep digital records or submit them due to age, disability, location or another reason

• You do not hold a UK National Insurance Number

• Religious beliefs that are incompatible with using electronic communications or keeping electronic records

There are also some automatic exemptions:

• Having a digital exemption from VAT already (for one of the above reasons)

• You are a trustee, including a charitable trustee or a trustee of non-registered pension schemes 

• You are a person that does not have a National Insurance number (this only applies for a tax year where you do not have a National Insurance number on 31 January before the start of that tax year)

• You are a personal representative of someone who has died 

• You are a Lloyd’s member, in relation to your underwriting business 

• You are a non-resident company

Upcoming changes in future years are:

• From April 2027 (using the 2025-26 tax year info), qualifying income of over £30,000

• From April 2028 (using the 2026-27 tax year info), qualifying income of over £20,000

Next Steps

Your first step, is to determine your legal requirements come April 2026 (and don't leave it to the last minute).

The next step is to decide how you are going to keep your digital records, and if you want any support from your accountant in doing so.

Then you need to decide how you are going to make your submissions (DIY, accountant or bookkeeper), and get in touch with the relevant people if needed.

And to end, a scenic photo of some trees to calm your mind after reading all that information!

But, my best advice - don't leave your tax return filing to January, realise that you need to get set for MTD IT and approach an accountant/bookkeeper. By then, their books might be full and you might miss out on the amazing support and guidance that one can offer!

If you have any questions after reading this - don't be shy and get in touch! MTD IT is new, and new things are scary so I'm here to help. You can drop us an email, call or WhatsApp, or even a comment below and we'll help you understand your requirements.

If you don't have an accountant, and you think you're going to be caught, then take a look at the rest of our website to see how Sunflower Accountancy Limited can help you.