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Making Tax Digital, also known as “MTD” in a long-term initiative by HMRC. In other words, the current annual self-assessment tax return form (SA100) will be replaced by a digital only process.
There are two aspects to MTD. Firstly, the need for “Digital Recordkeeping”, see the FAQ section below. Secondly, the need for information to be submitted to HMRC digitally (rather than via a tax return form). Submissions will also be quarterly rather than annually.
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records. In addition, they must submit quarterly updates to HMRC on their income and expenditure through MTD-compatible accounting software. Those with an income over £30,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand, meaning they can eliminate common errors and save time managing their tax affairs.
The government has also announced a review into the needs of smaller businesses. Particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses, and the best way for them to fulfil their Income Tax obligations.
Mandation of MTD for ITSA will not be extended to general partnerships in 2025, as previously announced. We await further updates on partnerships.
We also await further updates on Limited Companies.
A quarter is aligned with the tax year. Therefore, for an affected individual, the first update would be for the period 6 April 2026 to 5 July 2026.
An election can be made to report to the nearest calendar month. This will be particularly useful for those trades who are VAT registered, therefore already provide VAT updates for quarters aligned to a month end.
It will also be useful for trades who use an accounting period ending on 31 March. Making the election would mean the quarter end dates will be 30 June, 30 September, 31 December, and 31 March.
The £50,000/£30,000 limit is a combined limit across both trading income and property income. The limit does not apply to income other than trading or rental.
If HMRC agree that you are “digitally excluded”, then you are exempt from the MTD reporting requirements.
If HMRC agree that it is not practical for you to use digital tools by reason of age, disability or location, then you do not need to follow the MTD reporting requirements.
There is no prescribed criteria (specifically about age) as to why you can be excluded. An example cited is if remoteness of location means you do not have internet access at home. Meaning it would be unreasonable to travel to a location with coverage.
Unfortunately, unless you are Digitally Excluded, or exempt for some other reason, you are expected to submit MTD data as required.
Part of MTD requires records to be kept using Digital Tools. These tools will either be capable of interacting directly with HMRC to make submissions or will be linked to other tools that make the submission.
One calendar month from the end of the quarter.
Annual information related to the tax year needs to be provided by 31 January following the tax year.
Only income and expenses in relation to trading income and rental income is required quarterly. Further information can optionally also be provided but is not required.
No. The quarterly submission is supposed to be an overview of income and expenses, as recorded in the recordkeeping. HMRC do not have the expectation that accounting adjustments or a formal review of accuracy will be undertaken.
The quarterly submission demonstrates that records are being kept.
In simple terms – anything that would go onto a tax return today, needs to be submitted annually via MTD (for those taxpayers covered by the MTD process). For example, a sole trader who is within MTD, who also receives bank interest, dividends, and makes pension contributions would need to provide this data as part of their annual submission.
This is still not fully confirmed, but joint rental income will have a designated record keeper who will be responsible for making the quarterly submission on behalf of all recipients.
Today, one partner is nominated to sign the partnership tax return on behalf of the partnership. This process of having a nominated partner will continue for quarterly submissions under MTD.
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