MTD for Income Tax: What’s Changing and When It Affects You

A Phased Rollout of Making Tax Digital for Income Tax

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is being introduced gradually, starting from 6 April 2026. This new system will require certain self-employed individuals and landlords to keep digital records and send quarterly updates and a final declaration to HMRC using compatible software.

MTD for ITSA is designed to modernize the tax system, improve accuracy, and reduce the tax gap. Over the coming years, more people will fall under its scope based on their level of business or rental income.

Who Will Be Affected—and When?

The rollout dates and income thresholds have been confirmed as follows:

• From 6 April 2026: Individuals with total income of £50,000 or more from unincorporated trading and/or property businesses must join MTD for ITSA.
• From 6 April 2027: Those earning £30,000 or more in combined trading and/or property income will be included.
• From 6 April 2028: The threshold will be lowered further to include those with an income of £20,000 or more.

At present, there is no confirmed date for when those with income below £20,000 will be required to comply.

How Is Income Measured?

To determine whether you’re within the MTD for ITSA scope, HMRC will look at your total gross trading and property income, before expenses, from all relevant sources.

Even if no individual source exceeds the threshold, the combined income may still bring you within the scope. Importantly, your income from the 2024/25 tax year will be used to assess whether you meet the entry requirement for 6 April 2026.

Once you’re within MTD for ITSA, you must continue to comply unless your income drops below the current threshold for three consecutive tax years.

Real-Life Examples

To better understand how the rules apply, here are a few illustrative case studies:

Abigail earns £45,000 from her sole trader business and £12,000 from a rental property in 2024/25. Though neither source exceeds £50,000 on its own, her combined income of £57,000 means she’ll need to join MTD for ITSA from April 2026.

Billy has an annual trading income of £35,000. His total business income will require him to comply with MTD for ITSA from April 2027.

Caitlin runs two separate sole trader businesses earning £15,000 and £7,000 respectively. Her combined income of £22,000 qualifies her for MTD for ITSA from 6 April 2028.

Get Prepared Now

Understanding your MTD start date is critical. Traders and landlords should start planning ahead by:

• Tracking and reviewing current income levels.
• Exploring and adopting MTD-compatible software.
• Considering professional advice for a smooth transition.

Delaying preparation may lead to compliance challenges and penalties once your start date arrives.

Reference Notes:

• Taxes Management Act 1970, section 12C and Chapter A1
• The Income Tax (Digital Requirements) Regulations 2021 (SI 2021/1076)

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