The UK government’s Making Tax Digital (MTD) initiative continues to evolve, with Income Tax Self-Assessment (ITSA) going digital from April 2026. This move aims to streamline tax reporting, reduce errors, and encourage digital record-keeping. Here’s what you need to know and how to get ready.
1. What is MTD?
MTD is a government initiative requiring individuals and businesses to keep digital records and submit tax information online using approved software. Already implemented for VAT, MTD for Income Tax will apply to self-employed individuals and landlords with gross income over £50,000 from April 2026. By April 2027, this will extend to those earning between £30,000 and £50,000.
2. How MTD for Income Tax Works
You’ll need to:
- Keep digital records of income and expenses.
- Submit quarterly updates to HMRC via MTD-compliant software.
- Provide an annual final declaration to reconcile your tax figures.
3. Benefits of MTD
- Reduced errors: Automating records decreases mistakes.
- Real-time tax overview: Quarterly updates offer insight into your tax liability throughout the year.
- Simplified processes: MTD-compliant software makes tax submissions more efficient.
4. Preparing for MTD
- Choose MTD-compliant software like QuickBooks, Xero, or others.
- Start digital record-keeping now to ease the transition.
- Consult a tax advisor to understand the best solutions for your business.
5. Consequences of Non-Compliance
Failure to comply with MTD could lead to penalties. HMRC will expect digital records and quarterly updates, so make sure you’re ready to avoid fines.
6. Looking Ahead
MTD for ITSA will initially affect those earning over £30,000, but it may eventually expand to cover more taxpayers, including small business owners and landlords with lower incomes.
Conclusion: Prepare Now for MTD 2026
With the 2026 deadline approaching, it’s crucial to start preparing. Transitioning to digital tax processes now, adopting MTD-compliant software, and seeking advice from tax professionals will help ensure a smooth move to MTD and avoid any penalties