Making Tax Digital for Income Tax (MTD IT) is being phased in from April 2026, and HMRC is now starting to write to taxpayers it thinks are in scope.
Despite last-minute delays in the past, there is a confidence that this time MTD IT really will happen. High-level contact with HMRC by the tax and accountancy professional bodies tends to confirm this, and with MTD IT expected to reduce error and help close the tax gap, it seems highly unlikely that the government will back down now. Another strong driver is the fact that MTD IT sits on HMRC’s new Enterprise Tax Management Platform, and moving taxpayer data onto this platform is fundamental to modernising HMRC’s own digital systems.
What’s involved: MTD IT has three key components:
- keeping digital accounting records
- filing updates with HMRC every quarter, summarising business income and expenses. Updates must flow directly to HMRC from the digital records without manual input
- an end of year finalisation process.
Who is impacted and when: From April 2026,MTD IT will be mandatory for self-employed individuals and landlords, with what’s called gross qualifying income of more than £50,000 from those sources.
From April 2027, it will be mandatory where such income is more than £30,000, and from April 2028 for those with income more than £20,000.
Not yet in scope: Partnerships are expected to come into MTD IT at a later (unspecified) date.
Exemptions and deferrals: Limited exemptions apply either automatically or with notification to HMRC; we can help you ascertain if any of these apply to you. In addition, certain taxpayers will have a deferred entry to MTD. These include individuals who submit the residence/remittance basis pages with their tax return (SA109), who will not be required to join MTD IT until April 2027.
Moving ahead: MTD IT is a major change. It impacts the way you interact with HMRC, and how often you interact with HMRC. It also revolutionises the yearly timetable for accounts preparation. The scale of the change can’t be overemphasised, and it will be wise to start making some key decisions now.
If you would like to speak with one of our specialist advisers and discuss this further, please email solutions@ellacotts.co.uk or call us on 01295 250401.
* Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
Business Newsletter – May 2025
