What you need to know about Making Tax Digital for Income Tax

We would like to inform you of upcoming changes that will start to come into effect from April 2026, so that you are aware when receiving notifications from HMRC in the near future.

Making Tax Digital for Income Tax (MTD ITSA)

What is MTD ITSA?

Making Tax Digital for Income Tax is aimed to promote better and timely record keeping reducing errors and mistakes and is part of the Government’s initiative to reduce the tax gap.

It will require many self-employed individuals and landlords to keep digital records of income and expenditure relating to their businesses and rental properties. 

Those records will form the basis of quarterly updates which will need to be submitted digitally to HMRC. An annual “digital tax return” will need to be filed online like the current Self-Assessment regime. 

MTD ITSA will not change the due dates for paying income tax or filing the final “digital tax return.”

Who is affected and when will it come into effect?

The requirements of MTD ITSA will apply to self-employed individuals and landlords in two phases: 

• Phase 1 – from April 2026 for those with gross qualifying income of more than £50,000, before expenses. 
• Phase 2 – from April 2027 for those with gross qualifying income of more than £30,000, before expenses.

What years qualifying income counts?

The thresholds for the two phases of MTD will be assessed against the gross qualifying income reported on the most recent tax return filed prior to the mandation date, assuming tax returns have been filed on time, i.e. 2024/25 Tax Returns will be due for submission by 31 January 2026 and if that return reports gross qualifying income of more than £50,000 that individual will have to join MTD from April 2026.

What if I become self-employed or start renting a property part way through the year?

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 to compare 12 months’ worth of income against the MTD threshold.

How is income from jointly owned property accounted?

Only your share of the gross rents (before expenses) from any property jointly owned form part of your qualifying income.

Who is outside the scope of MTD ITSA? 

For now, self-employed individuals and landlords with turnover between £30,000 or less will not need to comply and will remain within the current Self-Assessment regime. In the Autumn Budget of 2024, it was announced that those with turnover of between £20,000 and £30,000 will be brought within MTD ITSA, however the exact date for this is not yet known.

Partnerships, including LLPs are not in the scope of MTD ITSA though it is intended for these to be brought into the regime at a later date. The individual members of a partnership are also not currently within the scope in respect of their partnership income, however any self-employment or property income outside of the partnership could bring them into MTD for those non-partnership sources only.

HMRC will be contacting individuals directly in April 2025 where the amount of qualifying income declared on their 2023/24 Tax Return indicates they may need to comply with MTD ITSA. 

Get in touch

If you do receive communication from HMRC regarding MTD ITSA and would like to discuss this further, then please do get in contact and we can help guide you.