MTD for Income Tax — Who Must Sign Up and When

ASESA Solutions Ltd - MTD for Income Tax — Who Must Sign Up and When

Making Tax Digital for Income Tax (MTD ITSA) is HMRC’s next major step in modernising the tax system and will apply to self-employed individuals and landlords who currently submit Self Assessment tax returns.

Whether and when you need to start using MTD for Income Tax depends on your qualifying income in a tax year. Qualifying income is the combined total of income from self-employment and property, before expenses.

According to HMRC guidance, the rollout will be phased as follows:

• If your qualifying income is over £50,000 for the 2024 to 2025 tax year, you will need to use MTD for Income Tax from 6 April 2026

• If your qualifying income is over £30,000 for the 2025 to 2026 tax year, you will need to use it from 6 April 2027

• If your qualifying income is over £20,000 for the 2026 to 2027 tax year, the government has set out plans to introduce legislation to lower the qualifying income threshold to this level in the future

  
  

MTD for Income Tax replaces the traditional annual-only reporting model. Instead of submitting one tax return after the end of the year, affected taxpayers will be required to:

• Keep digital records of income and expenses

• Send quarterly updates to HMRC using MTD-compatible software

• Submit an End of Period Statement and a Final Declaration to confirm annual tax liabilities

  
  

The aim of this approach is to reduce errors, spread the reporting workload across the year, and give taxpayers a clearer, more up-to-date view of their tax position.

In next week’s newsletter, we’ll look at compliance expectations and penalties under MTD for Income Tax, and why preparing early can help avoid unnecessary charges and last-minute stress.