LITRG: Time for taxpayers to get ready for Making Tax Digital for Income Tax

Taxpayers who report more than £50,000 of gross income¹ from self-employment and/or rental income in their 2024/25 tax return will be required to join the new Making Tax Digital for Income Tax (MTD) regime² from April 2026 and must have the software³ needed to participate.  

LITRG is encouraging anyone who thinks they could be in scope of MTD from April 2026 to complete their 2024/25 tax return well in advance of the 31 January 2026 deadline to see whether their income exceeds this limit.

HMRC will use the information provided in 2024/25 self assessment tax returns to identify taxpayers who will be impacted by MTD from April 2026. HMRC will then write to tell them they must follow the MTD rules, but this could be as late as February or March 2026, which leaves very little time to get organised for this major change.⁴ 

Some people who meet the income threshold might be able to apply for an exemption from MTD if they meet certain criteria, for example if they are digitally excluded.⁵

 Sharron West, Technical Officer at LITRG, said:

“There are still more than six months to go until the self assessment deadline for 2024/25 tax returns, but if you think you may meet the MTD threshold, you should act now.

 “Completing your 2024/25 self assessment tax return means you will know whether you have reached the income threshold that will require you to take part in MTD from April 2026.  

“You might not get a letter from HMRC notifying you of this until after the self assessment deadline, so by acting now, you are not only giving yourself the best chance of being ready for MTD, you’ll also know how much tax you will need to pay by  31 January 2026, giving you plenty of time to plan for this too.”

^Notes:

^{1. The qualifying income for the purpose of establishing whether you have breached the MTD threshold is annual gross income from self-employment and/or rental property. Note that if you have self-employment income and property income then you need to combine gross income from both sources to see whether you breach the MTD threshold.}

^{2. The digital requirements of Making Tax Digital for Income Tax are to keep digital records, submit quarterly updates of income and expenses and to file an annual tax return using commercial software.  The first tax return due once Making Tax Digital is mandatory will be for the 2026/27 tax year. The due date for filing a tax return and the payment dates for any tax remain the same under Making Tax Digital as they are for traditional self assessment tax returns.} 

^{3. HMRC are not providing software for Making Tax Digital, it will be necessary to use commercial software, both for keeping digital records and for filing a self assessment tax return. HMRC’s  MTD software choices page lists all the software products that are currently available that meet the requirements of MTD.} 

^{4. Based on information from 23/24 tax returns, HMRC wrote to some taxpayers earlier this year to tell them they expect them to be in scope of MTD from April 2026 if their 24/25 tax returns show similar information in due course. But letters advising individual taxpayers that following the new MTD rules is mandatory for them from April 2026 will not be sent until after the 24/25 tax return has been submitted.} 

^{5. It will be possible to apply for exemption from Making Tax Digital from Autumn 2025 onwards. HMRC will consider applications and if exemption is granted, you do not need to follow the new MTD rules.}  

^{6. We have detailed guidance covering all aspects of Making Tax Digital on our website and there is also a lot of information on GOV.UK.}