Are You Prepared For Making Tax Digital (MTD) For Income Tax?

If your earned income from self assessment or property exceeds £50,000 gross you will be affected by this change.

Making Tax Digital (MTD) for Income Tax is one of the most significant changes to the UK tax system for self-employed individuals and landlords.

If you are self-employed or receive property income, it is essential that you review your income which was reported on your 2024/25 tax return to see if you meet the criteria for Making Tax Digital.

You are required to register for MTD if you are registered for Self Assessment, earn income from self-employment and/or property, and your gross income from these sources exceeds £50,000.

It is important to note that this threshold applies only to self-employment and property income. It does not include employment income, dividends, or other sources of income.

HMRC will be using the information from your 2024/25 tax return to assess whether you meet the criteria for MTD.

If you commenced self-employment mid-year in 2024/25, your income will be annualised (pro-rata) to determine if you meet the threshold.

If you meet the above criteria, you will need to register for Making Tax Digital for Income Tax by 6 April 2026.

What Will You Need to Do?

Making Tax Digital requires you to keep digital records of your income and expenses using HMRC recognised MTD software.  You will need to access some compatible software to undertake this yourself.

Making Tax Digital states that you are required to submit quarterly updates to HMRC. The deadlines for quarterly submissions are 7^th August, November, February and May.

At the end of the tax year, you will also need to submit a final declaration, which replaces the traditional annual Self Assessment tax return.

What Are The Penalties?

HMRC will implement a new points-based system which will apply under Making Tax Digital.

• Late Submissions: Missing a quarterly or annual submission deadline will result in a penalty point. Once you reach two points for annual submissions, a £200 fine will be charged.
• Late Payments: Penalties for late payments will be based on a percentage of the outstanding amount, starting at 2% for payments overdue by 15 days and increasing thereafter.
• Soft Landing Period: For the 2026/27 tax year, HMRC will not apply penalties for late quarterly updates, giving you time to adjust to the new system.

If you are self-employed or receive property income and are unsure whether MTD will apply to you, we recommend reviewing your position now.

Exemptions from MTD

There are exemptions which can be claimed from MTD and these can be applied for in the following circumstances:

1. Taxpayers who are ‘digitally excluded’- if there are circumstances which make it not reasonably practical to comply.
2. It does not apply to partnership income.
3. If a taxpayer does not have a national insurance number.
4. Individuals who claim qualifying care relief such as foster carers for example.
5. Lloyds underwriters who have no other source of qualifying income.
6. Trustees, executors and personal representatives – in this capacity only.
7. Taxpayers who lack physical or mental capacity and have given power to someone under a power of attorney to act on their behalf.

The following are automatically exempt until April 2027:

8. Taxpayers in receipt of income from trusts or estates.
9. Taxpayers claiming averaging adjustments, such as farmers, musicians etc
10. Taxpayers who filed non residence pages with their 2024/25 tax return and expect to need to do so again in 2026/27.

To claim an exemption an application needs to be made by post or phone to HMRC.  We can assist with this if applicable.

For more information on Making Tax Digital please read our guide.

If you require any more assistance including registering or help making the quarterly returns, please contact us.

Related content

• PERSONAL TAX
• RENTAL INCOME
• PROPERTY INVESTORS
• PROPERTY
• ARTICLES