Making Tax Digital for Income Tax
Making Tax Digital for Income Tax (MTD for IT)
HMRC are beginning to roll out a new way in which taxpayers report their property and self-employment income. Affected taxpayers will have to make quarterly filings in addition to the annual tax return submission which we are all familiar with. These are some of the biggest changes since Self-Assessment began in 1997.
Timeline
From 6th April 2026 – Mandatory for the self-employed and landlords whose turnover (not profit) is £50,000 or over.
From 6th April 2027 – As above, but the turnover threshold is lowered to £30,000 or over.
From 6th April 2028 – As above, but the turnover threshold is lowered to £20,000 or over.
Who is affected
Any UK taxpayer who receives rental income (including furnished holiday let income) from a property or properties, either in the UK or abroad.
Any UK taxpayer who receives income as a self-employed individual. This includes subcontractors in the building trade who suffer CIS tax at source but excludes Partnership income for the time being.
If you operate via a UK Limited company and have no self-employed sources of income or rental income in your personal name, you are not self-employed and not affected by these changes.
How is Turnover calculated
The thresholds mentioned above are GROSS rental or self-employment income, before letting agent deductions, CIS deductions, commissions or other charges, i.e. before any expenses or deductions.
If you have both rental and self-employed income, these figures will be combined to determine if you are caught by the new filing requirements.
For jointly held properties, HMRC will look at the individuals share of rental income e.g. 50% if you own it with your spouse.
HMRC will look at the boxes populated on your tax return to 5th April 2025 to determine if you need to register for MTD for IT from 6th April 2026.
What if my turnover falls or I cease to trade/sell my property(ies)?
Once you are within the MTD filing regime, you will need 3 consecutive years of your turnover being below the MTD threshold (so £20,000) to enable to come out of the regime.
If you no longer have any income from property or self-employment (e.g. if you incorporate to a Limited company), you will likely need to notify HMRC to cancel your filing obligations. HMRC are yet to confirm this process.
Filing Requirements
There will not be a paper filing option. Taxpayers must file quarterly through MTD for IT software (Xero, Sage or other commercially available software).
You will need to make a separate quarterly submission for each source of income if you have multiple i.e. one each for self-employment, UK property and foreign property.
Each quarterly submission will detail the income and expenditure for that period.
The quarterly reports are cumulative (see period dates below) so if you make a mistake in one quarter it can be corrected in the next (or in the end of year declaration if an error is made in the 4th quarter).
Once you have submitted the 4th quarterly submission, you then need to complete an end of year declaration. This will be like the annual tax return where all other income or deductions are taken into account e.g. bank interest, employment, pensions, benefits, pension contributions, gift aid donations etc.
MTD for IT is simply a mechanism for reporting figures to HMRC. You do not need to pay your personal tax quarterly. The usual tax payment dates of 31st January and 31st July are currently unchanged.
Filing periods and deadlines
6th April 2026 to 5th July 2026 Deadline: 7th August 2026.
6th April 2026 to 5th October 2026 Deadline: 7th November 2026.
6th April 2026 to 5th January 2027 Deadline: 7th February 2027.
6th April 2026 to 5th April 2027 Deadline: 7th May 2027.
End of Year Declaration Deadline of 31st January 2028.
And so on for the next tax year.
You will have the option to prepare quarterly figures to 31 March / 30 June / 30 September and 31 December if you prefer. The deadlines for these quarter dates will be as above.