Making Tax Digital (MTD) for Income Tax is no longer a distant reform.
With less than a few weeks until it becomes mandatory for many sole traders, landlords and self-employed individuals, the countdown is well and truly on.
HMRC has begun sending thousands of letters to sole traders and landlords, warning them that they will soon be required to comply with new rules.
If you have received one of these letters, you must take it seriously as your tax reporting obligations are about to change.
What is MTD for Income Tax?
MTD for Income tax is part of HMRC’s move towards a fully digital tax system.
If you are affected, you will need to:
Quarterly reporting does not replace your annual tax return, but it will mean that you will have more regular interaction with HMRC.
Who will be affected by MTD for Income Tax?
MTD for Income Tax will be introduced in stages based on your gross income from either your self-employment or rental property or both.
The stages are:
Those entering MTD in April 2026 will need to submit their first quarterly update by 7 August 2026 and your digital records must be accurate from the very start of the tax year.
You will also still be required to file your 2025/26 Self-Assessment return by 31 January 2027.
What are the HMRC MTD letters?
The recent letters from HMRC have been sent to individuals who fall into the first phase of MTD for Income Tax.
The letter explains that those affected must begin reporting their income digitally, submit quarterly updates and use MTD-compatible software to do so.
The letter outlines:
HMRC is issuing letters in batches between February and March to taxpayers who qualify based on their submitted returns.
What should you do if you receive a letter?
If you receive a letter, you do not need to panic, but you must not ignore it.
You should first check that you are affected, based on your qualifying income.
While HMRC’s data is usually accurate, it is your responsibility to confirm whether MTD applies to you.
You will then need to:
What if you didn’t receive an MTD letter?
Not receiving a letter does not mean you are exempt from MTD for Income Tax obligations.
HMRC has been clear that the responsibility rests with taxpayers. You may still be required to comply if your income exceeds the thresholds, even if no letter arrives.
What should you be doing now to prepare for MTD?
The clock is ticking and you should have chosen suitable MTD software by now and have digital record-keeping in place.
You need to have moved away from spreadsheets and paper records and understand your new obligations to reduce the risk of errors or penalties.
You do not have to manage MTD for Income Tax alone and we are here to help you understand your requirements and ensure you have reliable processes in place.
We can take some of the pressure off you and handle quarterly submissions on your behalf and give you peace of mind that your tax returns are compliant.
If you need further advice on staying compliant with MTD for Income Tax, contact us today.
