What is MTD for Income Tax?

Making Tax Digital (MTD) is HM Revenue & Customs’ (HMRC) latest initiative aimed at modernising the UK tax system. It aims to make filing more effective, efficient, and easier for taxpayers to avoid making mistakes. MTD offers a new way for qualifying taxpayers to keep digital records and submit their tax information to HMRC in real-time.

If you file VAT returns for your business, you will already be familiar with the MTD process, as MTD for VAT has been in place for all VAT registered businesses since April 2022. The next major phase of this for HMRC is to roll MTD out to Income Tax Self-Assessment (or MTD for ITSA for those who love an acronym).

Instead of filing just one single Self-Assessment tax return each tax year, MTD will see individuals:

• Keep digital records of their income and expenses using MTD-compatible software.
• Send quarterly updates to HMRC throughout the tax year.
• Submit a “final declaration” which effectively replaces the Self-Assessment Tax Return, by 31 January following the end of the tax year.

No payments will be due for these quarterly submissions as the payment dates for Income Tax remain the same as they do currently for those in Self-Assessment.

Who needs to use MTD and when?

You must use MTD if all the following criteria apply:

• You are a sole trader and/or a landlord.
•  You are registered for Self-Assessment.
• You earn income from self-employment OR property, OR both.
• Your qualifying income exceeds the thresholds set by HMRC (see below).

Those earning below this threshold are not currently required to join but may opt in voluntarily.

When you are required to join MTD depends on your income:

The qualifying income threshold is based on income before any deductions – so whether you made an overall gain or loss is irrelevant, it is your level of income that is assessed.

HMRC have not yet confirmed that from 2026-27, the qualifying income threshold will reduce to £20,000, but it is worth being aware that there are discussions around this figure and further information will be published as it becomes available.

You are not required to use MTD if:

• Your qualifying income is £20,000 or less (currently – this may change in future pending legislation approval)
• You meet specific exemption criteria (e.g., age, disability, remote location).
• You have applied for and received an exemption from HMRC (see HMRC website for list of exemptions).
• You do not have a National Insurance number on 31 January (In this instance, you will only be exempt for the following tax year)

Will HMRC let me know if I am affected?

HMRC will review your Self-Assessment tax return for 2023/24 and check your qualifying income against the MTD thresholds.

If your income is above the relevant threshold HMRC will write to you, confirming that you must start using Making Tax Digital for Income Tax by the start of the upcoming tax year (6^th April 2026).

HMRC plan to send further correspondence in the New Year following 2024/25 Tax Return submissions.

! It is still your responsibility to check if and when you are obligated to use the service, and make sure you are signed up and prepared to use it when you need to. 

How do I register for MTD?

The MTD registration facility is currently open for:

• Voluntary registration for April 2025 (2025/26 tax year)
• Mandatory and voluntary registration for April 2026 (2026/27 tax year)

The MTD registration facility can be found here: Sign up for Making Tax Digital for Income Tax – GOV.UK

Requirements under MTD

• You will need to use MTD-compatible software to record and submit data. HMRC have published a list of compatible software for MTD.
• You will need a Government Gateway account; this will link to your personal Unique Tax Reference (UTR).

HMRC future plans:

• Business partnerships will also be required to join MTD, but HMRC will announce the timeline in the future when the legislation is finalised.
• This means that Partnerships may want to begin keeping digital records and exploring MTD-compatible software to prepare for future compliance.

We will be reaching out to all of our clients that will be affected by the MTD requirements, with an invitation to trial the process before the reporting requirement rolls out in April 2026.

Not currently a client and need help? Get in touch with us!

Navigating the MTD process and reporting requirements can seem overwhelming. As experienced tax advisors, we can:

• Help you assess whether you are required to report your income under MTD
• Help register you for MTD where necessary
• Assist with quarterly filings
• Ensure you remain compliant going forward

Don’t leave taking the next steps to the last minute – if you believe you may be affected by the thresholds set out under MTD, speak to one of our expert tax advisors today to begin the process of joining MTD for Income Tax.