Time to Go Digital: Why It’s Time to Give MTD for Income Tax Your Attention

Most VAT registered businesses have already felt the impact of Making Tax Digital (MTD) for VAT, which kicked off back in April 2019, and now applies to all VAT registered firms. 

MTD for Income Tax is the next major deadline, and if you’re self-employed or receive income from property, you’ll soon need to take action to stay compliant.

What is MTD for Income Tax?

In simple terms, MTD is HMRC’s plan to move away from manual record-keeping and yearly submissions, and instead switch to digital record-keeping and more frequent reporting. If your annual turnover is over £50,000, you’ll need to comply with MTD for Income Tax from 6th April 2026. If your turnover sits between £30,000 and £50,000, then your deadline is 6th April 2027.

Under these rules, the self-employed and property businesses will have to keep digital records of each transaction and send a summary of their business income and expenses to HMRC once every quarter via MTD-compatible software. At the end of the tax year, they’ll then finalise their numbers and confirm everything is correct. It’s a shift from the traditional yearly return to a more regular reporting process.

Why the change?

In theory, HMRC’s goal with MTD is to make tax simpler, more accurate, and less time-consuming in the long run – in practice, we shall see! By working closely with your accountant to give HMRC a clearer, more up-to-date picture of your income, you’ll reduce the chances of big surprises when the tax bill arrives. Your accountant will be able to spot any issues or missed deductions earlier, and help you make better decisions about your taxes throughout the year.

If you’ve already moved to cloud accounting for MTD VAT, our team can support you with a smooth transition to MTD for Income Tax. And, if you haven’t yet moved over to MTD software, we recommend getting in touch sooner rather than later. The process isn’t quite as straight forward as it might seem, and it’s important that it’s done right. We’ll work with you to ensure you’re up and running with any snags ironed out in advance of the mandated dates – while they may look far away right now, they’ll roll around more quickly than you think.

Key dates and thresholds

If you’re self-employed or a landlord, you’ll need to follow the requirements for MTD for Income Tax from: 

• 6th April 2026 – if your annual turnover is over £50,000, your MTD for Income Tax mandate begins
• 6th April 2027 – if your annual turnover is between £30,000 and £50,000, this is your mandated start date

There are still a few question marks on how MTD will apply to certain business types, like general partnerships, limited liability partnerships, and companies, but HMRC has confirmed that this won’t kick in before April 2028 at the earliest. 

So, for now, the focus stays firmly on self-employed individuals and property landlords within those turnover brackets.

How will it work in practice?

Under the new system, if you are a landlord or self-employed you’ll be required to keep digital records at the transaction level, and your accountant will do this through software that’s compatible with MTD. HMRC has removed some earlier requirements, like the ‘end of period statement’, which should (hopefully!) simplify things. Now, your accountant will be required to send four, cumulative, quarterly updates to HMRC, meaning the year’s figures add up as you go along.

At the end of the year, your accountant will finalise your tax position and ensure all the numbers that have been sent over are accurate.

Steps for getting started

1. Check your turnover – speak with your accountant to make sure you know where you stand in relation to the £50,000 and £30,000 thresholds.
2. Choose your software – if you’re already using online accounting software for MTD VAT, you may find it can handle MTD for Income Tax too. Your accountant will support you with making the best decision for your business.
3. Keep digital records – under MTD, every sale and expense entry needs to be recorded digitally. If you’re used to sending your accountant spreadsheets, you can still use them, and they will use bridging software to link your spreadsheet to HMRC.
4. Link with HMRC – once your accountant has set up your software, they’ll authorise it to interact with HMRC’s systems.
5. Stay on top of your numbers – one benefit of more frequent submissions is that you and your accountant will have a real-time snapshot of how your business is doing. They will reconcile your transactions regularly for you, which keeps your books tidy and your quarterly reports accurate.

Testing, bugs, and future phases

HMRC has a testing programme already under way, however experience tells us that there’s still likely to be problems once they go live.

Our recommendation is this: don’t try to navigate all of this on your own! It’s not as straight forward as it may seem and there will almost certainly be challenges with the system. Remember, you work with an accountant for a reason, and one of them should be because they support you to ensure you’re set up and ready in time for these kinds of HMRC changes. And if they’re not supporting you in this way then (sooner rather than later) it might be time to take your business elsewhere.

At Grant-Jones we are already preparing our clients for MTD and working with them to understand what it might mean for them. If you’d like that level of support and assistance, you’re welcome to reach out to our team.   

Beyond Income Tax, there’s talk of extending MTD to other business structures and to Corporation Tax. That won’t happen before 6th April 2028, so for now, the key is to focus on getting ready for the changes that definitely affect you.

Next steps

If you’re not sure how MTD for Income Tax could affect you, or if you want to find the right software solution for your business, it’s always best to seek tailored advice. Rest assured the Grant-Jones team is keeping a close eye on MTD developments, and we’ll keep you up to speed.

Feel free to get in touch if you have any questions about MTD or if you’d like a quick chat about your current setup. Our goal is to make sure you’re prepared ahead of time, so you can continue running your business smoothly without worrying about missed deadlines or unexpected surprises.