Making Tax Digital (MTD) for Income Tax has become mandatory for certain sole traders and landlords, shifting from traditional annual record-keeping to a digital system. This initiative requires individuals to maintain digital records, submit quarterly updates to HMRC, and use compatible software for tax returns.
Implementation of MTD is occurring in phases, starting with individuals whose total gross income from self-employment and property exceeds £50,000 during the 2024 to 2025 tax year. The income threshold will reduce to £30,000 in April 2027 and further to £20,000 in April 2028, which will expand the number of individuals required to comply with MTD.
Qualifying income encompasses gross earnings from self-employment and property, before any expenses are deducted. It does not include income from employment (taxed through PAYE), dividends, pensions, or partnerships.
The MTD timeline details specific start dates based on income levels:
- From April 6, 2026, for income over £50,000
- From April 6, 2027, for income over £30,000
- From April 6, 2028, for income over £20,000
Once mandated under MTD, individuals must keep digital records, submit four quarterly updates, and file an annual tax return, with initial deadlines set from August 2026. Exemptions apply, notably for those with a qualifying income of £20,000 or below, and partnerships remain outside the current scope.
Although there is a ‘soft landing’ period for the 2026 to 2027 tax year that delays penalties for late submissions, individuals must still adhere to digital record-keeping requirements.
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