Making Tax Digital for Income Tax

Making Tax Digital for Income Tax (MTD) will bring a fundamental shake-up in how taxpayers and agents interact with HMRC, and each other. It aims to promote better and more timely record-keeping to reduce errors and mistakes as part of the Government’s aim to reduce the tax gap.

MTD will operate on a more modern HMRC IT platform, improving security whilst enabling improved digital services such as pre-population of data and nudges/prompts to taxpayers fed by better connections with data held by HMRC.

This page provides access to MTD-related resources prepared by the ATT to help taxpayers and agents get ready for MTD.

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On 3 October 2024 we hosted a free webinar for ATT members: Making Tax Digital – how to get you and your clients ready. Our speakers were ATT Director of Public Policy, Emma Rawson, and Chris Jennings and Sam Wood from HMRC's MTD team.  You can access a recording of this webinar here: https://www.presenta.co.uk/ATT/MTD/031024/index.html (password: WR78CB53).

Emma also wrote an article for Tax Adviser on how agents can get ready for MTD.

As part of Tax Adviser magazine's podcast series, Emma sat down with respected tax consultant and tax lecturer Rebecca Benneyworth to discuss her experiences in the MTD testing phase. 

• Episode 1 covers Rebecca's initial experiences of testing as one of the first tax advisers to take part, and how to prepare for MTD.
• Episode 2 provides an update on what Rebecca has learned from her involvement in MTD testing, and gives a reminder not to delay getting ready for MTD. 

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HMRC communications to taxpayers and agents 

To raise awareness of the introduction of MTD from April 2026, HMRC will be emailing agents in mid-March 2025 who may have clients in-scope. HMRC will also be sending letters to taxpayers they believe may be in scope, with the first letters expected to arrive in April 2025. 

HMRC have shared copies of the taxpayer letter and agent email with us for information.  Please note these could be subject to change in future iterations.

Updated regulations and notice published

On 22 February 2024, the Income Tax (Digital Requirements) (Amendment) Regulations 2024 were laid before Parliament.  These regulations amend the existing Income Tax (Digital Requirements) Regulations 2021to reflect the changes to the timetable for MTD originally announced in December 2022 and the Autumn Statement 2023 changes (see below).

Alongside these, HMRC also published an Update Notice which provides more information as to what should be included in quarterly updates under MTD.

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Under the requirements of MTD, individuals who are subject to income tax on the profits of their trade, profession, vocation or property business will be required to keep their accounting records electronically (either using suitable software or on spreadsheet) and file quarterly returns to HMRC with details of their income and expenditure together with any other information that HMRC specifies. A final declaration will then be submitted after the tax year once the individual’s tax affairs have been finalised.

Although the frequency of reporting is going to change, the timing of tax payments will not and the current system of payments on account and balancing payment by 31 January after the tax year is expected to remain in place for the foreseeable future.

Our Making Tax Digital For Income Tax Frequently Asked Questions contains more detailed information.

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The mandation of MTD will be phased, with the exact date dependent on the taxpayer's income:

• From April 2026, self-employed individuals and landlords with incomes from those sources of more than £50,000 will be mandated into MTD.
• Those with income from self-employment and/or property of between £30,000 and up to £50,000 will be mandated from April 2027.

At the Autumn Budget on 30 October 2024, it was announced that MTD would be expanded to those with income over £20,000 by the end of this Parliament, with the precise timing to be set out at a future fiscal statement.

Although the Government has said they remain committed to extending MTD to general partnerships,  no 'start date' has been confirmed. All other partnerships (e.g. those that have corporate partners and Limited Liability Partnerships) are also expected to be required to join MTD at a future date (to be confirmed).  

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There will be limited automatic exemptions from MTD and other exemptions which will need to be claimed.  See the 'What exemptions are available' section of our Making Tax Digital For Income Tax Frequently Asked Questions, or MTD exemptions guidance on GOV.UK for further details. 

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In order to access MTD services and to supply updates on behalf of clients, agents need an Agent Services Account (ASA).  This is in effect a new Government Gateway to access the new service.  Each agency will have just one ASA per firm, and will be able to set up staff with administrator or assistant access to the account.  Many firms may already have created an ASA in order to submit MTD for VAT returns or Trust Registration Service returns. 

A basic outline of the ASA and how to set one up can be found here. HMRC publish details of any down time for maintenance or service issues.

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HMRC are currently running a testing phase for MTD.  Agents can sign up their clients for the testing phase directly via GOV.UK.  They should however first check that their client is eligible, that they have suitable software in place, and that their software provider can support them through the testing phase.

The current list of  compatible software products is set out on GOV.UK  We understand that there are a number of other products at various stages of development and HMRC have said that they will continue to add to this page as new products become available.  Those looking to join the testing phase should speak to their software provider before signing up to confirm that they are able to join.

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Enabling primary legislation for MTD for Income Tax was included in Sections 60 to 61 and Schedule 14 of Finance (No.2) Act 2017.  The explanatory notes to the original Bill can be found here.

Regulations setting out more details on MTD were laid on 23 September 2021.  These regulations are amended by the Income Tax (Digital Requirements) (Amendment) Regulations 2024 which were laid on 22 February 2024.  

On 7 December 2023, HMRC published further draft legislation for consultation. This includes regulations to amend the original regulations on MTD (laid on 23 September 2021) and tertiary legislation comprising a software notice, joint property owners notice and update notice.   Following that consultation, a final Update Notice has been published, with final version of the remaining notices expected to be released later this year.

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Software

Individuals within MTD for Income tax will be required to use software to keep their records and submit returns to HMRC via their Application Programming Interface (API).

There are essentially three different types of MTD compliant software:

• Software packages that can be used to keep digital records and file returns via HMRC’s API.
• API enabled spreadsheets – spreadsheets with an inbuilt function allowing them to file returns via HMRC’s API.
• Bridging software which can take return information from an existing spreadsheet and submit this to HMRC via their API.

Where a spreadsheet is used, the relevant data must be digitally transmitted from the spreadsheet or other source where the digital records are kept, directly to HMRC. The summary information for completion of the quarterly and final returns must not be physically re-typed into another software package.

The current list of MTD compatible software for income tax is here.

HMRC resources and guidance

HMRC's guidance on MTD can be found on GOV.UK. 

HMRC have launched an interactive MTD tool: Check if you need to use Making Tax Digital for Income Tax to make it simpler for taxpayers (and their agents) to understand if they are in scope of MTD and, if so, when they need to start complying with the requirements.  You can find more information about the tool here.

HMRC have also published promotional material on the benefits of MTD. 

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