Making Tax Digital (MTD) for Income Tax – Keith May Accounting Services

Making Tax Digital (MTD) for Income Tax – What You Need to Know

1. What Is MTD for Income Tax?

Making Tax Digital (MTD) is part of the government’s plan to move tax reporting online. Instead of keeping paper records and filling in one big tax return each year, you’ll need to:

Keep your business and property records digitally.
Send updates to HMRC every three months using special software.

It’s being rolled out gradually, starting with people who earn the most from self-employment or property.

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2. Who Needs to Use It?

You’ll need to use MTD for Income Tax if:

– You’re a sole trader (self-employed) or rent out property in the UK, and
– Your total income from those sources (before expenses) is above a certain amount.

You don’t need to use it yet if you only have income from employment, pensions, or investments.

If you earn less than the threshold, you can choose to join voluntarily — but you don’t have to.

3. Income Thresholds and Start Dates

Start Date	Who It Applies To	Income Over
April 2026	First group	£50,000
April 2027	Second group	£30,000
(Possibly later)	Everyone else	£20,000 (expected future stage)

“Income” means your total takings before expenses — not your profit. Once you start using MTD, you’ll have to stay in the system even if your income later drops below the threshold.

4. What You’ll Have to Do

Here’s what’s involved once you’re in MTD:

Keep digital records – use MTD-compatible software (like QuickBooks, Xero, or FreeAgent).
Send updates every 3 months – submit simple income and expense summaries to HMRC.
Submit an end-of-year summary – confirm total income and expenses like a final tax return.
Use approved software – check HMRC’s list of compatible programs.

5. Who Doesn’t Have to Use It

You may not need to use MTD if:

– It’s not practical for you to use a computer or the internet (for example, because of your age, a disability, or where you live).
– You’re a trustee or dealing with someone’s estate after death.
– You’re a non-UK company.

If you think you qualify, you can apply to HMRC for an exemption.

7. How to Get Ready

Check if and when you’ll need to join: Use HMRC’s tool: https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax

Pick your software: HMRC-approved software list: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax

Sign up to MTD: Sign up here: https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax
Start keeping digital records.
Submit quarterly updates (August, November, February, May).