Updates to Making Tax Digital for Income Tax

The Chancellor Rachel Reeves included updates within the Spring Statement to Making Tax Digital (MTD) for Income Tax, expanding its reach to include a wider range of small businesses.

What is Making Tax Digital?

MTD is a modernisation of the tax system that requires businesses to keep digital records of their income and expenses and file them on compatible software quarterly to HMRC. This requirement has applied to VAT registered businesses since April 2022, and from April 2026, will be introduced for self-employed individuals and landlords too.

Individuals will need to submit updates every quarter, bringing the tax system closer to real-time. An End of Year declaration will still be required – this will be similar to your normal self-assessment tax return.

Who will be affected?

Self-employed individuals and landlords with an income of more than £50,000 will be required to comply from April 2026. Those with an income of between £30,000 and £50,000 will need to do this from April 2027.

Key changes

It’s now been confirmed that starting from April 2028, sole traders and landlords with an income of more than £20,000 will also be required to use MTD-compatible software for tax returns.

Additionally, certain taxpayer groups, such as those with a Power of Attorney, non-UK resident foreign entertainers and sportspeople, ministers of religion, and recipients of the Married Couples’ or Blind Persons’ Allowances will be exempt or have their MTD obligations deferred. The criteria for deferrals will be set out once the legislation has been finalised.

Another significant update is the requirement for end-of-year information and final declarations to be submitted using MTD-compatible software, which eliminates the use of HMRC’s online service for these submissions meaning taxpayers can complete their tax obligations in one place.