MTD aims to promote better and more timely record-keeping to reduce errors and mistakes. It is 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.

The Making Tax Digital program was first announced in 2015. MTD for VAT was fully implemented in 2022. MTD for income tax (MTD) is a more complicated program, and has experienced a number of deferrals.

The Government confirmed its commitment to MTD on the timescale below at the Autumn Budget 2024. Based on our engagement with HMRC, the ATT has greater confidence than ever that MTD will go ahead from April 2026. 

MTD will have three key components: digital records, quarterly updates, and a year-end declaration. All transfers of data to meet these requirements will have to be done using digital links. See the relevant topics below for more details. 

No, the payment dates for tax will remain the same as under Self-Assessment – ie tax payable by 31 January following the end of each tax year, with payments on account payable for the following year by 31 January and 31 July where relevant. 

MTD will create additional record keeping and administration for many businesses and landlords. Professional agents will be able to assist their clients in complying with MTD. Our Find an ATT service can help you find qualified advisers who can assist with MTD.

MTD will apply to self-employed individuals and landlords with gross ‘qualifying income’ above the relevant threshold – broadly their combined income from trading and property, all measured before expenses. 

The date from which you have to comply with MTD depends on your qualifying income – ie your combined income from self-employment and property, all measured before expenses.

If your qualifying income is over £50,000, you will need to comply with MTD from April 2026. If your qualifying income is over £30,000, you will need to comply from April 2027. See the ‘Joining MTD’ topic for more details of what counts as qualifying income and when it’s measured.

The Government plans to expand MTD to taxpayers with qualifying income over £20,000 during the current parliament. 

The Government announced its intention at Autumn Budget 2024 to extend MTD to taxpayers with qualifying income of between £20,000 and £30,000 at some point during the current parliament, but the exact date is not yet known. 

MTD is intended to be rolled out to limited companies, partnerships and limited liability partnerships (LLPs) at some point in the future. No timescales have been proposed at the date of publishing shown above. 

Members of partnerships and LLPs are also outside the scope of MTD in respect of their partnership income. They may need to comply with MTD if they have other sources of qualifying income (self-employment or property income outside the partnership).

You will not need to comply with MTD if your qualifying income is below the relevant threshold. See the ‘Who’s in and when’ and ‘Joining MTD’ topics for more information.

If you don’t have a National Insurance number on 31 January, you will be exempt from MTD for the following tax year. This exemption applies automatically and does not need to be claimed.

Exemption can also be claimed if you’re digitally excluded, but the method of applying for this exemption hasn’t been confirmed at the time of writing.

Trustees and executors/personal representatives of deceased estates can also apply for exemption. See GOV.UK for further details of MTD exemptions. 

The thresholds for the two phases of MTD mandation will be assessed against the gross qualifying income reported on the most recent tax return filed prior to the mandation date (assuming all returns are filed on time). For instance, 2024/25 tax returns will be due for submission by 31 January 2026. If that return reports gross qualifying income of more than £50,000, that individual will have to join MTD from April 2026.

HMRC have indicated they will look at the following Self-Assessment return boxes in applying the £30,000 and £50,000 thresholds:

• Self-Employment Turnover  - either SA103F - Box 15 or SA103S - Box 9 or SA200 box 3.6
• Self-Employment Other Income - either SA103F - Box 16 or SA103S - Box 10
• UK Property Income - either SA105 Box 20 or SA200 box 6.1
• Other UK Property Income (grant of lease) - SA105 Box 22
• Other UK Property Income (reverse premiums) - SA105 Box 23
• Furnished Holiday Let (FHL) Income - SA105 Box 5
• Foreign Property Gross Income - SA106 Box 14
• Foreign Property Income (premiums) - SA106 Box 16

The figures reported in these boxes will be combined and, if the total exceeds the relevant threshold, the taxpayer will be mandated into MTD from the start of the next tax year following the filing deadline for the return in question, as explained above.

If the sole trade or property income you declare on your tax return relates to a new source of income which started in the year, the figure reported will need to be adjusted in order to compare 12 months’ worth of income against the MTD mandation threshold.

For instance, if you became self-employed on 1 January 2025 and earn gross income of £10,000 per month, your 2024/25 tax return will show £30,000 of income, which is below the MTD mandation threshold for April 2026. But that amount will need to be adjusted to estimate a full year’s worth of income – ie £120,000. You will therefore need to comply with MTD from April 2026 as your qualifying income exceeds £50,000 when adjusted pro-rata for a full year.

The MTD regulations do provide for an alternative approach of applying an alternative method if annualising ‘would work unreasonably or unjustly’.  This may be helpful for seasonal trades, where income is not expected to be even throughout the year, though HMRC have not yet confirmed their position.

Your qualifying income includes only your share of the gross rents from any property you own jointly. For instance, two spouses with a jointly-owned property which generates £24,000 of rent annually will each have qualifying income from this source of £12,000 per year.

Income which is not declared on the Self-Assessment  (SA) return will not be taken into account when applying the thresholds.  This means that, for example, rent a room receipts below the £7,500 threshold, or trading or property income below £1,000 where the trading / property allowance is claimed, will not count towards the threshold (provided they are not included on the SA return).

For example, if you have £29,000 of trading income and £5,000 of rent a room income, you will not be mandated into MTD as the rent a room receipts are not reported on your tax return and are therefore ignored for the purposes of the threshold test.

However, if you are required to join MTD anyway (ie because you have other income which takes you above the threshold) you will be required to account for all of your property or trading income under MTD.  For example, if you have gross trading income of £36,000 and rent a room receipts of £5,000 you will have to meet the MTD requirements for both your trade and property income from 2027/28.

Once you are mandated into MTD, you will only become exempt if your qualifying income falls below the £30,000 threshold for three consecutive tax years (based on filed tax returns, or quarterly updates where the deadline has not yet passed for filing the return for a year).

For example, assume you have the following qualifying income:

• 2024/25 - £52,000
• 2025/26 - £35,000
• 2026/27 - £25,000
• 2027/28 - £15,000
• 2028/29 - £5,000

You will have to join MTD from 2026/27 as the £50,000 income threshold is applied to your income for 2024/25 (ie the return due for filing on 31 January before the start of tax year 2026/27). It doesn’t matter that your income in 2025/26 was below the £50,000 threshold.

In order to be exempt, you would then have to have three consecutive years where you were within MTD, but your qualifying income was less than £30,000.  That means you won't be exempt from MTD until 2029/30. 

Depending on the facts and circumstances, it may be possible to apply for exemption on the grounds it is ‘not reasonably practicable’ for you to comply with MTD (for example because you are winding down your business and have very low profits which are extinguished by the costs of complying with MTD). However, you would need to convince HMRC that you meet the requirements for this exemption.

Otherwise, see the ‘Exemptions’ topic. 

If you’re in MTD, you will have to keep digital records of the amount, category and date of income and expenses relating to your self-employment and/or property business in some form of software. The categories used will follow those on current Self-Assessment returns.

Optional simplified record keeping options will be available in some cases – see the ‘Simplification options’ topic for more details. 

Digital records can be kept either in purpose-built software, or on spreadsheets. 

From your digital records, you will have to submit a summary of your business income and expenses every quarter. 

No, the quarterly updates won’t be as detailed as the annual tax return. You won’t need to make accounting or tax adjustments, unless you choose to, and you only need to include details relating to your self-employment and/or property business. 

By default, the quarters will be based on the dates of the tax year, so the first quarter will start on 6 April and end on 5 July.

A ‘calendar quarters election’ will be possible, which will align the quarterly update periods with calendar months instead of with the tax year – so the first quarter would be 1 April to 30 June. This is likely to be simpler for businesses which compile their accounts to a month-end date rather than to match the tax year. 

A separate quarterly update will be needed for each trade or property business. If you have sole trade and property income, you will need to submit eight quarterly submissions each year. 

Quarterly updates will be cumulative, so if an error is discovered in a previous submission, it can be corrected the following quarter. You will also need to correct the underlying digital records. 

Each quarterly update will need to be filed by the 7th of the month following the quarter-end – eg 7 August for the first quarterly submission.

The submission date does not change where a ‘calendar quarters election’ is made (see above).

After the fourth and final quarterly update has been submitted, you will need to file a ‘digital tax return’. This will have similarities with the current Self-Assessment return, but will pre-populate with the income and expenses from the quarterly updates already filed. Those entries will need to be adjusted for accounting and tax purposes (eg disallowing elements of private use or capital expenditure) .

Any non-business income sources, such as bank interest or salaries / pensions, will need to be reported, although MTD aims to enable greater pre-population of data held by HMRC, which should mean you just need to check HMRC’s figures. The digital tax return will also be the place to claim relevant tax reliefs, such as for pension contributions made during the year.

From the point where business records are created in software, all transfers of data will have to be made digitally, including: submitting the quarterly updates, making any corrections, and filing the year-end declaration. This also includes any transfers of business records, for instance between you and any bookkeeper or accountant you employ.

Permitted digital transfer methods include emailing, importing data and use of memory sticks. We are expecting further guidance from HMRC on permitted practices, but copying and pasting or manually retyping entries will not be allowed.

Where business or propertyincome is below the VAT registration threshold, you will be able to use ‘three-line accounts’ for that income source. This means you can record each item of income and expense without needing to allocate it to a specific category of income/expense type. The total income and total expenses will need to be reported each quarter, with no detailed categorisation needed.

The exception to this rule is residential finance costs (eg mortgage interest) for landlords, which still have to be categorised separately. 

If you’re sure you'll use simplified expenses or will claim the property and/or trading allowance, you don't need to keep records of your actual expenses.

Retailers can include in their digital records a single daily gross takings figure, rather than recording each transaction individually.

Simplification options are also planned to accommodate the range of record keeping arrangements which can exist between joint owners of rental properties. See Joint property owners section for more details. 

Landlords will only need to keep digital records and submit quarterly updates in respect of their share of income and expenses relating to jointly owned properties.

You can choose to either keep full, line-by-line details of your share of income and expenses from jointly owned properties, or, in respect of your jointly owned properties only, you can choose to record your share of income each quarter, and your share of expenses annually. 

You can choose to submit full details of income and expenses each quarter. Alternatively, in respect of jointly owned properties only, you can choose to just report your share of income (not expenses) each quarter. Your share of expenses would be reported via your end of year submission (tax return) instead.

Joint property owners with property income below the VAT registration threshold can also use Three-line accounts, as explained under the ‘Simplification options’ topic. 

See the article MTD notices relax rules for joint property owners written by the ATT and published on AccountingWEB, which explains the choices available to joint property owners. 

HMRC will not provide MTD compatible software themselves, but most major software providers are expected to offer suitable products. HMRC have published a list of compatible software for MTD, including bridging software and some free options,  ut the choice available is expected to grow as we get nearer to MTD going live. HMRC maintain a list of compatible software. 

HMRC plan to write to taxpayers during spring / summer 2025 where the amount of qualifying income declared on their 2023/24 tax return implies they may need to comply with MTD in future, assuming their income remains at a similar level in 2024/25.

More definitive communications are planned after 31 January 2026 based on the income reported in 2024/25 tax returns, once those have been submitted. 

HMRC will not register taxpayers within scope of MTD automatically. If your income meets the relevant threshold, you will need to sign up to use MTD in much the same way as taxpayers register for Self-Assessment now.  The exact sign-up mechanism is not yet known.

Penalties for late submissions and late payment for taxpayers within MTD will move to a points based system, similar to the rules for VAT.

Taxpayers in MTD will receive a point each time they miss a submission deadline (quarterly updates and year end submission). Points accumulate until a threshold is reached, at which point a £200 penalty will be issued. From that point onwards, any further late submissions will result in an immediate £200 penalty.

To ‘reset’ the penalty position, the taxpayer will need a set period of compliance (4 quarterly updates, or 2 an of year returns) and to have submitted all returns required for the previous 24 months.

Penalties for VAT and MTD will be treated separately.

The existing Self-Assessment penalty regime will continue to apply until you join MTD, and for taxpayers outside the scope of MTD.

HMRC are running a testing phase for MTD. Joining the testing could help you to understand in advance what MTD will involve for you. HMRC have a dedicated support team to help taxpayers in the testing program. 

There will be fewer consequences of getting things wrong during the testing phase – for instance there will be no penalties for being late submitting a quarterly update during the testing phase. 

Details of how to sign up for testing can be found on GOV.UK. 

Agents will be able to sign clients up to MTD, but there won’t be a bulk sign-up service, so this will be a time-consuming exercise for larger firms. The sign up facility is not yet available, but is expected to open well in advance of April 2026 to allow plenty of time for registrations.

The ATT has published a ‘get ready guide for agents’ which contains tips and advice on how to prepare your firm and your clients for MTD. 

The ATT’s MTD resources are available via our Making Tax Digital for Income Tax homepage.

The following GOV.UK resources may also be of interest:

• HMRC’s guidance about MTD
• Online tool to help determine when you might need to use MTD
• Exemptions from MTD
• HMRC’s list of compatible software
• Details of how to sign up for testing
• HMRC promotional material on the benefits of MTD.