As part of the government’s modernisation of the tax system, the next phase of Making Tax Digital will be implemented in April 2026.
It requires self-employed and landlords with an annual income above £50,000, to keep digital records and submit quarterly updates to HMRC. Please note, this threshold applies to the gross combined income from both self-employment and rental sources prior to the deduction of any expenses.
From April 2027, it will be mandatory for those with an income over £30,000.
HMRC is continuing to roll out further information on the regulatory change and we are working with clients to ensure compliance.
You can view their approved software list at this link.
We are continuing to receive updates from software providers to understand their solutions and will update this page with information as and when we receive it. In the meantime, you can view and download guidance and help sheets from the following sources:
HMRC – https://www.gov.uk/government/collections/making-tax-digital-for-income-tax
Sage – Making Tax Digital – How to get ready for MTD Income Tax | HMRC recognised | Sage UK
Xero – MTD for Income Tax Guidance & Advice | Xero UK
QBO – QuickBooks UK Blog | QuickBooks UK Blog
Please contact your usual Ensors contact or submit an enquiry should you wish to discuss MTD for ITSA.
Last updated: 19 May 2025
FAQ’s
1.What is Making Tax Digital for Income Tax and who does it apply to?
MTD for Income Tax is a UK government initiative that will require self-employed individuals and landlords with a combined gross income from self-employment and rental properties over £50,000 to keep digital records and submit quarterly updates to HMRC using MTD-compatible software from April 2026. Those earning between £30,000 and £50,000 will be brought into the scheme from April 2027.
2. What are the key changes under MTD for Income Tax?
Under MTD, affected individuals must:
– Keep digital records of income and expenses
– Submit quarterly updates to HMRC via approved software
– Submit an End of Period Statement (EOPS) and a Final Declaration by 31 January following the end of the tax year
This replaces the current single annual Self Assessment return.
3. What types of income are included under MTD for Income Tax?
MTD for ITSA applies to self-employment and property income. If your combined gross income from these sources exceeds the threshold, you’ll need to comply. Other income types (like employment or pension income) remain outside MTD but must still be included in the final declaration.
4. What software do I need to comply with MTD?
You will need MTD-compatible software to record your income and expenses and submit updates to HMRC. This could be a full accounting package or bridging software that connects your spreadsheets to HMRC’s system.
5. Will my current software be compatible?
Please check HMRC’s approved software list here.
6. I don’t have software or my software isn’t compatible what do I need to do? Â
Please contact your usual Ensors contact or submit an enquiry here.
7. What happens if I don’t comply with MTD rules?
Failure to comply may result in penalties under the new points-based penalty system. Each missed submission earns a point, and once a threshold is reached, a financial penalty is charged. It’s important to stay compliant to avoid fines and ensure your tax affairs are in order.
