HM Revenue and Customs (HMRC) is pushing ahead with its plans mapped in their Digital Transformation Roadmap. This includes a more digitally focused approach and from April 2026, Income Tax will soon become digital for self-assessment taxpayers, sole traders and landlords.
Making Tax Digital (MTD) is HMRC’s initiative to modernise the current tax systems and ensure taxpayers are regularly recording their figures, submitting on time and communicating effectively with HMRC.
Having introduced MTD for Value Added Tax (VAT) in 2022, the focus is shifting to MTD for Income Tax, which will start rolling out from April 2026.
If you are self-employed or a sole trader, you need to understand the new laws coming into place and if they will affect you.
As the introduction of MTD for Income Tax is phased, there is a possibility you may be required to start following the laws after a certain date. Clarifying this will help you plan and understand your own tax obligations.
If you’re self-employed, run a business on your own, or earn rental income as a landlord, this could apply to you. MTD for Income Tax will apply to you at a certain time if your annual turnover and gross income surpass a certain threshold.
If your turnover sits at or exceeds £50,000 the new MTD for Income Tax laws will apply to you from April 6, 2026. The threshold then reduces to £30,000 from April 6, 2027, before dropping to £20,000 from April 6, 2028.
Your income from the 2024/25 tax year will be the basis for deciding when you will be required to comply with the MTD for Income Tax laws.
According to a report, HMRC have estimated the new MTD for Income Tax legislation will affect around 2.916 million people, which is 42 per cent of self-assessment taxpayers. Of those, 864,000 are expected to come under the new rules as early as April 2026.
If the new MTD for Income Tax laws apply to you, there are regulations in place that you must follow in order to comply.
You will need to use compatible software or structured spreadsheets to keep track of your income and expenses as paper records will not be accepted.
Furthermore, you will be required to submit quarterly updates. Every three months, you’ll need to send a digital summary of your income and expenses to HMRC and finalise your tax position. This means confirming your total income and any adjustments, which replaces the traditional annual self-assessment return.
All updates must be sent using HMRC-approved software, or you can choose to work with an accountant or tax agent who will do this on your behalf.
Preparation is key. You will see very quickly how important it is to be prepared for MTD for Income Tax. Knowing when it will apply to you gives you the best opportunity to plan.
With the first phase of MTD for Income Tax just a few months away, now is the time to prepare. Knowing whether the rules apply to you and when you’ll have to comply gives you the breathing room to get systems in place and avoid any last-minute stress.
If you’re not entirely sure how these changes affect your situation, it’s a smart move to speak with finance experts. They’ll walk you through what MTD means for you, help you understand your reporting requirements, and make sure you’re all set to go when your time comes.
Need support with self-assessments and tax returns? Speak to our team.
