Making Tax Digital continues to change the way people report earnings and submit tax returns to HMRC. It will affect both self-employed individuals and landlords when changes come into effect over the next couple of years.

This blog will tell you everything you need to know in advance of these changes, so you can prepare and transition to MTD with minimal issues when the time comes.

IMPORTANT: As part of the 2025 Spring Statement, the government announced that MTD income tax requirements will be extended to those with turnover of more than £20,000 from April 2028.

A reminder: What is Making Tax Digital (MTD)?

As the name suggests, Making Tax Digital is a series of new regulations requiring businesses and individuals to maintain accurate digital records, use appropriate software and submit updates more regularly via these systems.

Why is Making Tax Digital happening?

The main purpose of Making Tax Digital is to improve and modernise the UK tax system, making it easier for taxpayers to get their taxes right, and helping HMRC administer tax returns more efficiently.

Making Tax Digital for VAT

Some changes are already live, such as Making Tax Digital for VAT. VAT registered businesses are required to adhere to these new digital standards unless they qualify for exemption.

When will MTD for Income Tax come into effect?

The introduction of Income Tax to Making Tax Digital will be happening gradually. There are three key upcoming dates after which people will be affected:

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The key changes for people who pay Income Tax through Self-Assessment

Subject to the dates above – individuals who pay Income Tax via self-assessment will need to plan for a number of changes.

Keep and maintain digital records

Self-assessment taxpayers must keep and maintain digital records of income and expenses, including those from property. Even if this isn’t mandatory for you yet, it is a great idea to start doing this anyway, as it will improve your reporting and save time!

Software apps such as FreeAgent, Quickbooks, Xero and Sage enable you to do this quickly and easily with a very reasonable fee.

Quarterly income and expense updates

Instead of sending a self-assessment tax return once a year, self-employed individuals and landlords will need to submit four quarterly updates to HMRC, covering business income and expenses.

Here are the key points you need to know:

• You must use approved MTD-compatible software (your accountant can advise on this).
• The deadlines for each quarterly update will be the 7th August, 7th November, 7th February and 7th May.

Submit a final declaration

In addition to the quarterly updates, individuals affected will also need to submit a final declaration at the end of each tax year. This will finalise your Income Tax position and replace the existing Self-Assessment tax return.

During this process, you will ensure your updates are all correct, provide details on additional taxable income and include any applicable reliefs.

The deadline for this will be the same as the current Self-assessment tax return. It will need to be submitted, and all taxes paid by 31^st January of the following tax year.

Why not sign up and get started early?

Even if you are not legally required to enter the MTD scheme until 2026, 2027 or later, certain businesses and landlords can opt in early through a pilot scheme that the government has been running since 2018. If you are interested in learning more about this, speak to one of our accounts team and we’ll be happy to help.

Even if you don’t/can’t opt in to MTD yet, keeping digital records will help you familiarise yourself with the software and digital processes at your own pace. This can reduce stress and minimise errors during the eventual transition.  

Digital records also improve efficiency, provides you with real-time financial insights so you can make better business decisions simplify your taxes.

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If you’d like to learn more about Making Tax Digital, whether for VAT or for Income Tax. Send us a message today.