The UK’s transition to Making Tax Digital (MTD) for Income Tax is fast approaching, and if you’re self-employed or a landlord, it’s important to start preparing. Here’s a breakdown of what you need to know and how to get ahead of the upcoming changes.
Key Deadlines and Requirements
For the tax year 2024 to 2025, your Self-Assessment tax return is due by 31 January 2026. Once submitted, HMRC will review your return to determine if your qualifying income exceeds £50,000. From 5 April 2027, this threshold will be lowered to £30,000, bringing more taxpayers into the MTD requirement.
If your income exceeds the threshold, you will need to comply with MTD for Income Tax from 6 April 2026. HMRC will confirm this by letter. If you use an accountant or tax agent, they can assist you in meeting these requirements.
Steps to Get Ready for Making Tax Digital
If you qualify for MTD for Income Tax, you’ll need to:
Find Compatible Software: MTD requires using approved software to keep digital records and submit your information to HMRC. Now is the time to explore different software options and find one that fits your needs and budget.
Sign Up for MTD: Once you have the right software, you or your agent must sign up for Making Tax Digital for Income Tax. The software must be authorised and connected to HMRC so that your information is submitted directly.
Get Ahead with the HMRC Pilot Scheme
To help ease the transition, HMRC offers a pilot scheme for MTD, which you can join during the 2025/2026 tax year. Participating in the pilot will give you valuable experience with the new system and help you identify and address any issues before MTD becomes mandatory.
Our Suggested Action Plan
To make the process as smooth as possible, we recommend:
Researching Software Options: There are many software packages available for MTD. Evaluate your options now to determine which solution best suits your business and budget. Many providers offer free trials, which can help you make an informed decision.
Considering Early Adoption: Joining the HMRC pilot scheme is an excellent way to get comfortable with the new requirements ahead of time. Early adopters often have the advantage of better support and more time to adjust to new systems.
Making Tax Digital represents a significant change in how you manage and report your tax obligations. Preparing early will help ensure a smooth transition, giving you more time to adapt and reducing the risk of any last-minute complications. If you need help navigating MTD or want advice on suitable software options, feel free to get in touch with us. We’re here to help you every step of the way.