Making Tax Digital for Income Tax

What is MTD for Income Tax?  

The aim of MTD for Income Tax is to create a paperless tax reporting system and make it easier for individuals and businesses to get their tax right and keep on top of their affairs. Under the scheme, all affected individuals are required to store records of their business income and expenses in digital format and report a summary profit report to HMRC once every three months. This is sometimes called ‘real time’.

Self-employed traders and landlords with income (before expenses) of over £50,000 from April 2026 (this will reduce to £30,000 from April 2027) are required to adopt MTD for Income Tax. Where there is more than one trade, or the taxpayer is both (for example) a sole trader and landlord, the test applies to the combined income.

 

MTD ITSA currently only applies to individuals: partnerships and trusts will continue to report under the existing Self Assessment system regardless of the level of their relevant income.

Taxpayers affected need to use MTD-compatible software to send their updates to HMRC. The deadline for this quarterly summary information is one month following the quarter end with a Final Declaration at year end.

It should be noted that there are no announced plans to change the existing timetable of tax payments. Income tax will still be payable by 31 January following the end of the tax year. Any payments on account will be due by 31 January and 31 July as usual. 

Find more information here about Major changes for landlords and the self-employed

How we can help

If you are affected and currently use a desktop bookkeeping system you need to ensure its updated to comply with MTD for Income Tax or investigate how to integrate it with bridging software. Although HMRC are still compiling their list of MTD for Income Tax compatible software you should not delay as some older software simply won’t be updated and you may need to change to a newer package. If you do not currently use any form of software, you need to consider moving to a digital bookkeeping system.

Moving to online accounting can offer many other time-saving and efficiency benefits. Used correctly, it can provide you and your accountant with an overall, detailed and up-to-date view of your accounts for better financial decision making.

There are many online accounting products on the market, but we would recommend Xero, Dext Solo, and Hammock. We can provide versions of these specifically tailored to meet your needs and offer help with the initial set-up and training.

The software is available by monthly subscription. Both Xero and QuickBooks Online offers subscribers constantly updated systems to guarantee that you are always using the latest version.
   
If you would like more details or to arrange a free software demonstration, please email Martin Southern at m.southern@morriscrocker.co.uk or tel 023 9248 4356.