Getting Ready for MTD for Income Tax

HMRC are introducing a new way to file your self employment and property income, Making Tax Digital (MTD) for Income Tax. You will need to keep digital records of your income and expenditure relating to your businesses and rental properties. Each quarter you will need to send information to HMRC and following the year end, you will make a final submission to include all of your income from other sources.

From April 2026 individuals with gross self employment and/or property income over £50,000 will need to register for MTD and make submissions quarterly.

From April 2027 the threshold drops so individuals with gross self employment and/or property income over £30,000 will need to register for MTD and make submissions quarterly.

Finally, from April 2028 individuals with gross self employment and/or property income over £30,000 will need to register for MTD and make submissions quarterly.

What will this involve?

• Business and property records will need to be kept digitally using MTD-compliant software. This software can vary from a full accountancy package to bridging software attached to your existing records kept in a spreadsheet.
• From these records you will need to make quarterly submissions for each income source (self-employment, UK property, foreign property).
• After the end of the tax year, the quarterly submissions will be collated by HMRC along with other personal income information they hold. This information will form the basis of your end of year tax return.

What should I do now to get ready?

• If you are already using software, check that it is MTD compliant. HMRC have a tool to help you choose your software. MTD software We can also offer advice on what software will work well for you and your business.
• Have a separate bank account for your business transactions. This will reduce the need to unnecessarily categorise personal transactions.
• Keeping your bookkeeping up to date will help you to submit your quarterly submissions seamlessly. Doing little but often can be less cumbersome than looking at everything all at once.
• If you currently keep paper business records, you may find it easier to move to a spreadsheet to record your transactions. This could then be connected to bridging software to make your quarterly submissions.

What are the benefits of MTD for Income Tax?

By keeping more regular digital records this should help to streamline your tax reporting, keep a closer eye on the cash in your business, be more aware of trends and issues within the business and help with forecasting and budgeting.

If you would like to arrange a meeting to discuss the changes under Making Tax Digital for Income Tax, please contact the office to book a slot.