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Making Tax Digital

What is MTD for Income Tax?

Under the Making Tax Digital (MTD) requirements, individuals who are subject to income tax on the profits of their trade or property business will be required to maintain their accounting records electronically. Additionally, they will need to submit quarterly returns to HMRC, detailing their income and expenditure.

A final declaration must then be submitted after the tax year once the individual’s tax affairs have been finalised.

Although the frequency of reporting will change, the timing of tax payments will remain the same. The current system of payments on account and balancing payments by 31 January after the tax year will continue for the foreseeable future.

Who will be affected by MTD for Income Tax?

The following groups will need to comply with Making Tax Digital (MTD) for Income Tax:

  • Phase 1 (from April 2026): Sole traders and/or landlords with gross combined income over £50,000 (before expenses).
  • Phase 2 (from April 2027): Sole traders and landlords with gross combined income over £30,000 (before expenses).
  • Future Phase: MTD for Income Tax will eventually extend to those with income over £20,000 (date to be confirmed).

Be sure to stay updated on these changes to ensure compliance with the upcoming MTD regulations.

What makes me MTD Compliant?

To become MTD compliant, you must register for Making Tax Digital (MTD) by the following deadlines:

  • Phase 1: By 6 April 2026 for those with income over £50k
  • Phase 2: By 6 April 2027 for those with income over £30k

Additionally, digital records must be maintained using bookkeeping software to comply with the digital link rules. This ensures that your tax affairs are accurately recorded and compliant with MTD regulations.

What are the submission deadlines for each quarter?

Digital records must be kept in line with the following quarterly periods, with adherence to the submission dates. The example below applies to taxpayers who need to comply under Phase 1 (2026-27 tax year):

Quarter Due Date Period Covered
1 5 August 2026 6 April 2026 to 5 July 2026
2 5 November 2026 6 July 2026 to 5 October 2026
3 5 February 2027 6 October 2026 to 5 January 2027
4 5 May 2027 6 January 2027 to 5 April 2027

A Final Declaration must be submitted by 31 January following the end of the tax year. This Final Declaration should include taxable income from all sources (investment income, claims to relief, bank interest, etc.). At this stage, adjustments can be made to the figures submitted in the quarterly updates.

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