Making Tax Digital for Income Tax

Phase 2 of HMRC’s ‘Making Tax Digital‘ (MTD) Campaign is underway, bringing self-employed business owners and landlords into the digital tax regime. MTD’s set to change how accounting records are kept and managed, by making tax returns simpler and more efficient for everyone.

We’re here to guide you through the important changes and help prepare you on the upcoming changes that may impact you and your business from April 2026.

 

MAKING TAX DIGITAL: RECAP

In a nutshell, Making Tax Digital (MTD) for VAT came into play on 1^st April 2019, requiring VAT registered businesses above the current turnover threshold of £85k, to do away with manual or Excel-based recording systems to submit VAT data to HMRC. This phase is now including MTD for Income Tax.

Instead, returns are to be submitted digitally.

It’s one of the largest and most significant changes to tax legislation we’ve seen for decades and will most certainly have an impact across the accounting industry.

For businesses, the aim of MTD is to simplify ‘getting tax right’. Whilst that sounds ideal, in reality, there will be a lot of learnings and new procedures to follow as HMRC progresses its MTD roadmap.

 

WHO’S AFFECTED BY MTD & What’s the criteria?

Self-employed individuals and landlords with a qualifying income above £20,000 will be affected. The date at which you’re affected varies.

 

What’s qualifying income?

Qualifying income is the Total Turnover plus Gross Rent. This is turnover excluding VAT and before any expenses are considered.

 

When am I affected?

• April 2026 for qualifying income above £50,000
• April 2027 for qualifying income above £30,000
• April 2028 for qualifying income above £20,000

 

What will be required?

Individuals affected by the Making Tax Digital requirements will need to submit 4 quarterly returns to HMRC as well as their usual end of year self-assessment tax return.

 

What returns ARE required?

• Quarter 1 – 6 April to 5 July due by 7 August
• Quarter 2 – 6 July to 5 October due by 7 November
• Quarter 3 – 6 October to 5 January due by 7 February
• Quarter 4 – 6 January to 5 April due by 7 May
• Annual Return – 6 April to 5 April due by 31 January

Each quarter will be cumulative.

How do I submit the quarterly returns?

The quarterly returns must be submitted through a compatible accounting software, and all individual details of income and expenses for the return period must be reported on the returns.

 

What happens if I don’t submit quarterly to HMRC?

HMRC will issue fines and penalties to tax payers who don’t comply with the Making Tax Digital requirements.

 

Will the date of my tax payments change?

No, the due dates of tax payments will remain at either 31 July or 31 January.

 

How can I ensure I’m compliant?

Keeping digital records on an approved accounting software will ensure you’re compliant with the requirements.

Having a separate bank account for your self-employment or rental business will mean you can import data direct to the software, which saves you time manually inputting data. By having the transactions through a separate bank account all of your personal transactions are excluded, meaning less admin.

Discuss with us before you do anything.

Our team can advise on the best accounting software for you and your business that not only meets your needs, but is simple and easy to navigate. We can obtain discounts on softwares and provide you with specialist training to save you time, money, and stress.

Although this is an unavoidable change, the benefits of MTD for Income Tax & Self-Assessments will outweigh the perceived negatives.

 

Are you ready for this change?

Depending on the qualifying income outlined above, the Making Tax Digital changes are set to take effect from April 2026 and will impact business owners and the way they do their accounting.

Start preparing and managing your income digitally with confidence as soon as you can.

For support in planning effectively and staying ahead of upcoming changes, get in touch with your TC Group local office.

FIND OUT MORE