January is a busy month for taxpayers. If you’re among the millions rushing to complete your Self Assessment by the 31st of January, you’ve likely gained a clearer picture of your income and whether you qualify for Making Tax Digital for Income Tax (MTD IT – note that this was previously termed MTD for ITSA or Making Tax Digital for Income Tax Self Assessment).
What is MTD IT?
Making Tax Digital (MTD) is HMRC’s flagship program to modernise the tax system. The program was originally announced in the Budget back in 2015 and launched for VAT in April 2019.
MTD IT is the next step for self-employed individuals and landlords. The aim is to streamline the process of submitting income tax information through digital record-keeping and quarterly submissions via compatible software.
Do you qualify for MTD IT?
From April 2026, MTD IT will apply to self-employed individuals and landlords with a gross annual income of more than £50,000. Here’s what you need to know:
- If you have a gross annual income above £50,000, you will need to comply with MTD IT from 6 April 2026.
- If you have a gross annual income between £30,000 and £50,000, you will have until April 2027 before the new rules apply.
- If your income is below £30,000 you are not yet included in the rollout, though HMRC is reviewing future plans.
- There have been no further updates regarding partnerships.
What does this mean for you?
If you qualify, here’s what MTD IT entails:
- Digital Record-Keeping: You’ll need to keep track of your income and expenses using HMRC approved digital software, like Xero, Sage or Dext.
- Quarterly Updates: Instead of an annual return, you’ll submit updates to HMRC every three months, giving a clearer view of your tax position throughout the year.
- End of Period Statement (EOPS): This finalises your income and expenses for the year.
- Final Declaration: Similar to the current tax return, this confirms the details for HMRC.
Why start preparing now?
Whilst the deadline may seem far off and has previously been delayed, HMRC has confirmed that this will be going ahead in 2026. HMRC has also confirmed that they will be contacting those individuals who they believe will be affected later this year.
Transitioning to digital record-keeping can take time, especially if you’re used to traditional methods. If you haven’t started thinking about this already, we highly recommend that you start preparing now. This will help you to avoid a last-minute scramble when the rules come into effect.
If you’ve completed your Self Assessment for the 2023-2024 tax year, take a moment to review your gross income from self-employment and property. If it exceeds £50,000, you’re in the first group to join MTD IT in April 2026. This gives you ample time to plan and adapt to the changes.
How can we help?
If you’re a Harold Sharp client impacted by MTD IT, the way we submit your Income Tax Self Assessment will change from April 2026, moving to quarterly returns. We’ll be in touch next month to provide tailored guidance and ensure a seamless transition.
Not a Harold Sharp client? If you’re unsure how MTD IT will affect you or need guidance on choosing the right software, our tax team is here to help. Contact us on 0161 905 1616 or email tax@haroldsharp.co.uk.