From April 2026, HMRC is changing how many individuals report income.
If you are self-employed or receive rental income, you may soon need to keep digital records and submit updates to HMRC every quarter under Making Tax Digital for Income Tax Self-Assessment (MTD ITSA).
If this applies to you, planning ahead will make a significant difference.
What is MTD for Income Tax?
Making Tax Digital is HMRC’s move towards a fully digital tax system designed to reduce errors and give taxpayers better visibility over their position during the year.
Under MTD, you will need to:
- Keep digital records of income and expenses
- Submit quarterly updates using approved software
- Complete a final year-end declaration
This replaces the current system of filing one Self Assessment return per year.
Who Will Be Affected and When?
MTD will be introduced in stages:
- From April 2026 for individuals with income over £50,000
- From April 2027 for those over £30,000
- From April 2028 for those over £20,000
This applies to individuals who are self-employed or landlords and whose combined gross income exceeds the threshold.
The key point is that the threshold is based on total income before expenses, combining both property and self-employment income.
Example
If your latest tax return shows £26,000 of rental income and £26,000 of self-employed income, your total income is £52,000. This means you will be required to join MTD from April 2026.
HMRC determines this based on your most recently submitted tax return. Once you fall into MTD, you will usually remain within the system unless your income drops below the threshold for three consecutive years.
What Will You Need to Do?
Keep Digital Records
You must maintain records using compatible software or spreadsheets linked to bridging software. Manual entry or copying and pasting between systems is not permitted.
Choosing the right system early is key. This is an area where MITLEV accountants can help you implement the right setup from the outset and avoid unnecessary disruption.
Submit Quarterly Updates
You will need to report income and expenses every three months for each income source.
Deadlines are:
- 7 August
- 7 November
- 7 February
- 7 May
These submissions are summaries rather than full tax returns. Estimates are allowed, but consistency and accuracy will still be important.
Submit a Final Year-End Declaration
At the end of the tax year, you will submit a final declaration which replaces your current Self Assessment return.
This includes adjustments, other income, capital gains and any reliefs.
The deadline remains 31 January following the tax year.
What Income Counts?
Included:
- Self-employment income
- UK and overseas rental income
Excluded:
- Employment income
- Dividends and interest
- Pension income
- Partnership income
If a property is jointly owned, only your share of the income is included.
HMRC Letters
HMRC has already started issuing letters to taxpayers whose income exceeds £50,000.
These are simply to raise awareness. However, receiving one is a clear sign that you should review your position sooner rather than later.
Exemptions
You may not need to follow MTD rules if your income is below the threshold or if you are digitally excluded due to factors such as age, disability or location.
Certain individuals are also deferred until April 2027.
If you are unsure, MITLEV Accountants can review your circumstances and confirm whether MTD applies, as well as assist with exemption claims where appropriate.
Software Requirements
You will need to use MTD-compatible software or spreadsheets supported by bridging tools.
The key requirement is that records must be fully digital from start to submission.
Penalties
A points-based penalty system will apply.
Late submissions can result in a £200 penalty once a threshold is reached.
Late payments will incur penalties and interest based on how overdue the payment is.
Do Payment Dates Change?
No. Tax payment deadlines remain the same.
31 January for balancing payments and first payment on account
31 July for the second payment on account
What Should You Do Now?
The biggest shift for most individuals will be moving from annual reporting to a quarterly system.
That means putting the right processes and software in place well in advance.
Leaving this too late can lead to rushed decisions, poor systems and unnecessary compliance issues.
At MITLEV Accountants, we are already helping clients transition to MTD by setting up software, managing quarterly submissions and ensuring everything is fully compliant from day one.
If you think this may apply to you, now is the time to act.
