Making Tax Digital for Income Tax: Rollout stages and requirements

The government has outlined the rollout of Making Tax Digital (MTD) for Income Tax, which mandates digital record-keeping and quarterly reporting for sole traders and landlords. The requirement to use MTD depends on qualifying income thresholds, beginning with those earning over £50,000 based on their 2024 to 2025 tax returns. While the annual tax return and payment deadlines remain unchanged, the process requires compatible software to manage digital records, submit quarterly updates, and finalize annual returns.

What it means for a practice

• Clients must transition to compatible software or bridging solutions to manage digital income and expense records for self-employment and property portfolios.
• Practices should note that new penalty points systems replace existing late filing penalties, though penalties for late quarterly updates are waived for the 2026 to 2027 tax year.
• Accountants must help clients identify their specific start dates based on their qualifying income thresholds for the 2026, 2027, and 2028 tax years.