Preparing for Making Tax Digital for Income Tax

Since the announcement of Making Tax Digital (MTD) in 2015, the government’s rollout of the programme has encountered several challenges. While the introduction of MTD for VAT was successful, the subsequent phase—MTD for Income—has faced significant delays. Initially scheduled for 2023, the implementation was first postponed to 2024 due to the COVID-19 pandemic and then further delayed to 2026 in response to the ongoing cost-of-living crisis.

Making Tax Digital for Income Tax is expected to affect how 4.2 million Self Assessment taxpayers report their income to HMRC. Although the initiative has been pushed back to 2026, individuals, sole traders, and landlords who submit a self-assessment tax return should begin preparing now for the upcoming changes.

What is Making Tax Digital?
The Making Tax Digital programme is designed to simplify tax management by digitising the tax system for individuals and businesses. Taxpayers who fall within the MTD for Income Tax criteria will be required to maintain digital records and submit quarterly summaries to HMRC through HMRC-approved software. The aim is to help taxpayers stay on top of their obligations and reduce errors currently prevalent in Self-Assessment tax returns.

Who will need to comply with Making Tax Digital for Income Tax?
From 6 April 2026, those who meet all the following criteria will need to comply with Making Tax Digital for Income Tax:
• You are an individual
• You are registered for Self Assessment
• You were a Sole Trader or Landlord before 6th April 2025
• You have a qualifying income of more than £50,000 in the 2024 to 2025 tax year.

What Changes Can You Expect with Making Tax Digital for Income Tax?
Currently, taxpayers submit their Self Assessment forms online or by paper annually. However, under MTD for Income Tax, digital income updates will need to be submitted every three months. These quarterly submissions will provide an estimate of the tax due, though payment will still be required by the usual deadline of 31 January in the following calendar year.
The deadlines for finalising and paying your tax remain unchanged. The final annual report and payment must be submitted by 31 January.

What will happen by 6 April 2026?
1. Submit your Self Assessment Tax Return for the 2024 to 2025 tax year by 31 January 2026.
2. HMRC will review your tax return to determine if your qualifying income exceeds £50,000.
3. If your income surpasses the £50,000 threshold, HMRC will notify you that you must begin using MTD for Income Tax by 6 April 2026.
4. You or your agent (FBRSeed) must find software compatible with MTD for Income Tax and authorise it.
5. You or your agent (FBRSeed) must sign up for Making Tax Digital for Income Tax.

Navigating these changes can seem overwhelming, but our experienced accounting and bookkeeping team is here to help. We’re ready to guide you through the process of complying with Making Tax Digital for Income Tax.

For assistance with your business’s accounting and bookkeeping, contact our experts by emailing reception@fbrseed.com.