What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax (MTD for IT) is next to be introduced in phases, starting on 6 April 2026. From then, sole traders and landlords with a gross trading or gross rental annual income of more than £50,000 must comply with MTD for IT accounting and quarterly reporting requirements. Otherwise, they will likely be fined. 

From 6 April 2027, sole traders and landlords with a gross trading/rental income of £30,000-£50,000 will need to comply with MTD for IT accounting and reporting rules. It is likely that those with gross trading/rental income of £20,000-£30,000 will need to comply with MTD for IT requirements from 6 April 2028. 

When impacted, sole traders and landlords must maintain digital financial records using MTD for IT-compliant software that can report income and cost summary updates to HMRC each quarter. They will be able to view an estimated tax bill. After the fourth quarterly update, summary totals for the whole tax year will be shown within the software. Adjustments can then be made.

Any other taxable income must also be reported to HMRC via their MTD for IT software. A final declaration must then be made, confirming that the information provided is accurate and complete. This must be made before 31 January following the end of the tax year during which the taxable income was earned or received. HMRC will then work out the final final tax bill.