Who will need to use Making Tax Digital for Income Tax?
The cornerstone of MTD for Income Tax is the shift towards digital record-keeping and quarterly submissions. This means that many self-employed individuals and landlords will be required to use compatible software to manage their tax obligations. If you’re registered for Self Assessment and have income from self-employment or property, you might need to use MTD for ITSA. However, it’s not a blanket requirement. The need to join MTD for ITSA depends on your income level.
Eligibility criteria and timelines
- Income over £50,000 – If your qualifying income from self-employment or property exceeds £50,000 in the tax year 2024 to 2025, you will be required to use MTD for ITSA from 6 April 2026.
- Income over £30,000 – If your qualifying income from self-employment or property exceeds £30,000 in the tax year 2025 to 2026, you will be required to use MTD for ITSA from 6 April 2027.
What is included in your qualifying income?
Your qualifying income encompasses the total income you earn as a sole trader or landlord, before deducting any allowable expenses. This includes:
- Trading income – Gross income from your self-employment activities.
- Property income – Rental income from properties you own.
It’s vital to calculate your qualifying income to determine your MTD obligations accurately. Remember, this is the gross income, not your profit after expenses.
Check if you need to use Making Tax Digital for Income Tax
To ascertain your eligibility, you need to understand the phased rollout of MTD for Income Tax. The threshold for mandatory participation is being implemented in stages.
When should you start using Making Tax Digital for income tax?
The implementation of MTD for Income Tax is phased, with different start dates based on income levels.
- From 6 April 2026, sole traders and landlords with a qualifying income of more than £50,000 a year will be required to follow the rules for MTD for Income Tax.
- From 6 April 2027, sole traders and landlords with a qualifying income of more than £30,000 a year will be required to follow the rules for MTD for Income Tax.
This phased approach allows individuals time to adapt to the new digital reporting requirements.
If you become a sole Trader or a landlord after 6 April 2026
For individuals who begin operating as a sole trader or landlord after 6 April 2026, your obligation to comply with MTD for Income Tax will be subject to your income and the regulatory thresholds at that time. Make sure you keep up-to-date with any updates to the MTD regulations, and to ensure you are using compatible software from the outset if required.
Key changes under Making Tax Digital for Income Tax
The transition to MTD for Income Tax brings about several significant changes-
- Digital record-keeping – You must adopt digital record-keeping practices for your income and expenses, leveraging software that meets compatibility criteria.
- Quarterly submissions – Instead of submitting a single annual Self Assessment tax return, you will be required to submit quarterly updates to HMRC.
- End of Period Statement (EOPS) – At the end of your accounting period, you will need to submit an EOPS, confirming your final income and expenses.
- Final declaration- A final declaration is submitted to HMRC to finalise your tax liabilities.
The objective of these changes is to achieve a more precise and reliable system of tax reporting, and provide a more real-time view of your tax liabilities.
Who will need to use the service from 6 April 2026?
As mentioned, from 6 April 2026, sole traders and landlords with a qualifying income exceeding £50,000 per year will be mandated to participate in MTD for Income Tax. This indicates the initial phase of the rollout, targeting those with higher income levels.
What will have to happen by 6 April 2026?
By this date, affected individuals must have transitioned to compatible software for digital record-keeping and quarterly submissions. They will also need to be familiar with the process of submitting an EOPS and a final declaration.
Who will need to use the service from 6 April 2027?
From 6 April 2027, the scope of MTD for Income Tax will expand to include sole traders and landlords with a qualifying income above £30,000 per year. This further widens the net of individuals required to comply with the new digital reporting rules.
Who will not need to use Making Tax Digital for Income Tax?
Not everyone will be required to participate in MTD for Income Tax. Those with a qualifying income below the specified thresholds will not be mandated to use the service. However, they may choose to do so voluntarily.
Specifically:
- Those with income below the £30,000 threshold after 6 April 2027.
- Those that are exempt from MTD.
When do you need to apply for an exemption?
In certain circumstances, you may be eligible for an exemption from MTD for Income Tax. Exemptions are typically granted when
- Digital technology is not a feasible option in your circumstances due to age, disability, or location.
- Religious objections exist.
- Other exceptional circumstances prevent you from complying with the digital requirements.
If you believe you qualify for an exemption, you must apply to HMRC, providing evidence to support your claim. It is important to remember that exemptions are not automatically granted and are assessed on a case-by-case basis.
