Making Tax Digital (MTD), effective from 1 April 2026, is a significant change as to how Self Employed and Property Landlord taxpayers report their income and expenditure to HMRC.
Below are some of the Frequently Asked Questions (FAQ’s) we have been asked on the subject so far:-
What is MTD?
MTD has been introduced primarily to give HMRC more visibility as to the income and expenditure of Self Employed and Property Landlord taxpayers whilst also trying to promote more timely record-keeping.
In very simple terms MTD means making quarterly digital submissions to HMRC, using an accounting software package, in addition to making the usual year end submission.
Who does MTD apply to?
MTD applies to Self Employed and Property Landlord taxpayers with gross income (before the deduction of expenses) over and above the relevant thresholds. See the next section for these thresholds.
When does MTD start and what are the relevant income thresholds?
MTD comes into effect from 1 April 2026 – but not necessarily for all Self Employed and Property Landlord taxpayers. That depends on your level of gross income.
If your gross income exceeds £50,000 per year then you will need to comply with MTD from 1 April 2026.
If your gross income exceeds £30,000 per year then you will need to comply with MTD from 1 April 2027.
If your gross income exceeds £20,000 per year then you will need to comply with MTD from 1 April 2028.
What are the relevant quarter end dates and reporting deadlines?
Quarterly reporting will operate cumulatively and covers the following periods with the following deadlines, irrespective of the actual accounting year end date of the business.
Q1 – 1 April to 30 June – Deadline 7 August.
Q2 – 1 April to 30 September – Deadline 7 November.
Q3 – 1 April to 31 December – Deadline 7 February.
Q4 – 1 April to 31 March – Deadline 7 May.
What needs to be reported?
HMRC have confirmed that a simplified 3 line report can be submitted each quarter, showing income, expenditure and profitability. No detailed categorisation over and above that is required.
Does MTD affect Limited Companies and/or Partnerships?
HMRC have confirmed that MTD will not be expanded to include Limited Companies.
There is however an intention to roll out MTD at some point in the future to include Partnerships and Limited Liability Partnerships. As yet no timescales have been announced.
Do I need to pay Income Tax quarterly?
At the moment, no. It is purely quarterly reporting that has been introduced thus far.
Do I need an accounting software package?
An accounting software package is almost certainly needed in order to make the digital submissions to HMRC.
If you have a software package already in place you should speak to your accountant about the most efficient way of making the submissions through that.
If you do not have a software package then speak to your accountant to see if they can assist you in making the submissions on your behalf using their own software.
What if I become Self Employed or a Property Landlord midway through the year?
If you were to become Self Employed or a Property Landlord midway through the year then your gross income will need to be projected to estimate what your annual income will be. It is your estimated annual income that will then determine at what point MTD applies.
What if I jointly own a Property?
MTD only applies to your share of the gross rental income received. Not the overall total gross rental income received by all of the owners of the property.
Does this affect me if I am already within MTD for VAT?
Unfortunately so – MTD for Income Tax and MTD for VAT are two separate things.
What if my income falls beneath the qualifying thresholds?
Once you are within MTD you will only become exempt if your gross income falls beneath the relevant threshold for 3 consecutive years.
What if I make a mistake in one quarter?
MTD reporting is cumulative so if an error has been discovered it can simply be corrected in the submission for the following quarter.
Do I still need to do a Self Assessment Tax Return?
After the fourth and final submission you will need to file your usual Self Assessment Tax Return, pre-populated with the income and expenditure from the already-submitted quarterly reports you have made. There will undoubtedly be some adjustments needed for accounting and taxation purposes which you should liaise with your accountant about. The usual submission deadline of 31 January still applies.
Are there penalties under MTD?
Penalties for late submissions will be calculated on a points-based system, similar to those currently in place for VAT. No financial penalty arises for the first late submission but may well do for continual offenders.
Penalties for failing to keep adequate records however can be as much as £3,000 depending on the offence involved.