The UK tax system is undergoing a significant transformation. Starting in April 2026, self-employed individuals and landlords with income above specific thresholds will move away from the traditional Self-Assessment process and instead be required to report their income through Making Tax Digital for Income Tax (MTDIT), a new digital-first system.
What is Making Tax Digital for Income Tax (MTDIT)?
In essence, MTDIT replaces the existing annual Self-Assessment tax return (SA100) for self-employed individuals and landlords with a more frequent, digitally based reporting system. In place of the current one-yearly submission, affected individuals will be required to:
- Keep digital records: all income and expenses will need to be recorded digitally using MTDIT software.
- Submit quarterly updates: every three months, a summary of income and expenses from self-employment and/or property letting will need to be submitted to HMRC.
By default, MTDIT quarterly reporting will follow the tax year, starting with 6 April to 5 July 2026, with a filing deadline of 7 August. Alternatively, individuals may be able to make a 'calendar quarters election', which will align the quarterly reporting periods with calendar months; although this won't change the filing deadlines.
A separate quarterly update will be needed for each trade or property business. For example, individuals who have sole trade and property income will need to submit eight quarterly submissions each year, thereby substantially increasing the reporting burden.
- Make a final declaration: at the end of the tax year, a final declaration will need to be submitted to confirm all income and claim any reliefs and allowances.
Who is affected and when?
The implementation of MTDIT is being phased in, based on an
individual's total annual gross
income from self-employment and property (known as qualifying
income):
- From 6 April 2026: earnings over £50,000
- From 6 April 2027: earnings over £30,000
- From 6 April 2028: earnings over £20,000.
If you have been affected by the basis-period reforms, the transition profits assessed between 2024/25 tax year, and the next four tax years will not count towards your qualifying income. Qualifying care relief for carers will not be included.
HMRC will review individual taxpayer's 2024/25 tax returns to identify and notify affected individuals. However, HMRC will not automatically register taxpayers, it is up to the individual (or their agents) to sign up.
Exemptions from MTDIT
Some individuals and entities are exempt from MTDIT owing to specific circumstances, such as age and/or disability, or those subject to insolvency procedures. Additionally:
Automatically exempt
- Trustees (including charitable or non-registered pension scheme trustees)
- Individuals without a National Insurance number (as of 31 January before the start of that tax year)
- Personal representative(s) of someone who has died
- Lloyd's members (in relation to their underwriting business)
- Non-resident company.
Exempt requiring HMRC approval
- Customers who have a Power of Attorney
- Non-UK resident foreign entertainers and sportspeople who have no other qualifying income
- Customers for whom HMRC cannot provide a digital service.
Individuals will also not be required to use MTDIT until April 2027 if they have information that they would need to submit using the SA109 schedule, i.e. residence, remittance basis.
Partnership or LLP members are also currently excluded for their profit shares but must comply if they have other qualifying income such as sole trade or property income.
Will I still need to complete a tax return (SA100)?
Yes, after submitting your final quarterly update, you will need to file a 'digital tax return' (end of year submission). This will be similar to the current Self-Assessment return but pre-populated with your quarterly data and any information HMRC holds.
You'll also need to include any other non-business income, tax adjustments and/or reliefs claimed. The end-of-year submission will be due by 31 January following the end of the respective tax year, just like the current Self-Assessment system.
Will the income tax due dates be affected?
No, there will be no change to the income tax due dates.
Payments on account where required will need to be made in January
and July, and any balancing tax due will remain payable by
31 January following the end of the respective tax year.
Will there be any penalties for non-compliance?
Although HMRC is offering a grace period during the initial
testing phase, once MTDIT
becomes mandatory, a new points-based penalty regime will apply for
late submissions and payments. The new regime is designed to be
more proportionate:
- Annual submissions: two points
- Quarterly submissions: four points
- Monthly submissions: five points
Once a taxpayer reaches the thresholds, they will be fined
£200. If a taxpayer has not
reached their threshold, penalty points will automatically expire
after two years.
What you need to do now
The time to prepare is now as delaying could lead to a rushed
and stressful transition.
Therefore, you should:
- Understand if you are affected by the new requirements
- Adopt compatible software and begin to keep digital records
- Contact us to discuss your specific circumstances, explore the software options available, and find out how we can support you in preparing for MTDIT.
Further information on MTDIT is available on the GOV.UK website: Use Making Tax Digital for Income Tax [external link]
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
