Get ready now for MTD, warns ATT

Making Tax Digital for Income Tax (MTD) will see those with income from trading and property required to keep digital records and submit quarterly updates to HMRC, along with an annual “digital tax return”.

It comes in to force for those with a total gross income (before expenses) of over £50,000 a year from April 2026.  Those with income between £30,000 and £50,000 will come in a year later, in April 2027.

The ATT says that, despite the first wave of MTD still being over a year away, those affected should ensure they prepare now for the new regime, which will involve a range of changes to how many people manage their record keeping and tax affairs.

ATT President Senga Prior said:

“Making Tax Digital is a little over a year away, and represents the biggest change to income tax since self-assessment was introduced.

“HMRC are going to start writing to those they think will be affected by this change in April and May this year but, for many taxpayers, this will be the first time they become aware of the reforms. Although we’re still a year away, the scale of the change is huge.

“Those affected must consider now how they will handle the shift, including their software options and the costs. Some might want to consider looking for a tax adviser, accountant or bookkeeper to help, if they don't have one already.  They can also join HMRC's testing programme if they want to have a practice run.”

HMRC will not be providing taxpayers with MTD-compatible software, needed to keep records and file returns, meaning it will have to be purchased instead from commercial providers.

The ATT warns this increased cost, along with the extra administrative work required to make more frequent submissions, could place a burden on sole traders and landlords. It has answered some frequently asked questions about MTD.

Senga Prior added:

“Taxpayers will need to use MTD-compatible software to keep their records and file information with HMRC. This may be a steep learning curve if they have not used software in the past.

“Software may also come with a cost, as HMRC will not be providing IT programs to comply with the new regime. Some free products will be available, but these may not be suitable if a taxpayer has more complicated affairs or needs support.

“Another key challenge is the requirement to interact with HMRC more often – with an update to be filed each quarter as well as an annual return. This could lead to a heavier administrative burden on those who have previously only undertaken record keeping once a year when preparing their tax return.

“On the upside, some businesses may benefit from the better record keeping that comes with MTD – for example by having a better, more real time view of their financial position, instead of waiting until they file their tax return in January.”