What is changing under MTD for Income Tax?
Making Tax Digital for Income Tax (MTD), will come into effect in April 2026. Instead of sending a Self Assessment tax return (SA) to HMRC once a year, those affected by MTD will have to submit four quarterly updates about their business income and expenses. At the end of the tax year, they will also have to send a final declaration, which replaces the current SA.
Who is affected?
From April 2026), MTD for Income Tax will apply to self employed business owners and landlords with a total business and/or property income above £50,000 per year. From April 2027, the threshold reduces to qualifying income of more than £30,000. In 2028, this reduces further, to £20,000 a year.
What action do I need to take if I am affected?
1. Sign up for MTD for Income Tax
2. Keep digital records Under MTD for Income Tax.
It’s a good idea to start doing this as soon as possible so that you have plenty of time to prepare. We work with Xero which is competitively priced and HMRC approved. With Xero, your bank transactions are imported directly into the software ready for coding.
3. Send quarterly updates
These updates are a summary of the business income and expenses over the previous three months. The deadlines for these updates are:
• 7th August
• 7th November
• 7th February
• 7th May
4. Finalise your business income
At the end of the tax year, you will need to submit a final declaration and confirm that the updates you’ve sent are correct or make any necessary adjustments. You will also add any details about other taxable income or reliefs to reach your final income / tax position. As with the current SA process, you’ll have to submit the final declaration and pay the tax you owe by 31st January of the following tax year.
How do I sign up to MTD for Income Tax?
You can sign up directly with HMRC or if your accountant or bookkeeper is signing up on your behalf, HMRC has outlined a separate process for them to follow.
Is it worth Preparing now even if I don’t meet the Threshold?
We would advise anyone who will meet the threshold at some point beyond 2026 to consider implementing a digital system now to keep their books. There are a number of benefits to this as well as ensuring you are prepared for MTD, which include:
• Less paperwork (receipts can be uploaded and original documents disposed of)
• Digital systems result in improved accuracy and less time on bookkeeping which means increased business productivity.
• Reduced stress and worry when it comes to filing tax returns
• Real-time access to the financial situation of the business helping you to manage cashflow and tax planning. You can be proactive rather than reactive.
• Taxpayers don’t have to wait until the end of the tax year to find out how much tax they owe and can plan ahead.
To find out more please contact us and we will be happy to provide you with a quotation.
Let us help you start saving money, by streamlining your business accounting functions. For a free consultation contact us today.
Xero Certified advisor & partner since 2010.
Xero is cloud-based software that simplifies your bookkeeping and accounting with sophisticated reporting capabilities.
Michelle Brooks Bsc (hons), FICB
mb@churchlanemanagement.co.uk
07826 930342 / 01252 323554
152 Church Lane East, Aldershot, Hants. GU11 3SS
