Making Tax Digital for Income Tax

MAKING TAX DIGITAL FOR INCOME TAX

Making Tax Digital for Income Tax (MTD for ITSA) is the biggest change to self assessment in a generation. From 6 April 2026 it applies to sole traders and landlords whose qualifying income from self-employment and property was over £50,000 in the 2024/25 tax year. The threshold falls to £30,000 from April 2027 and to £20,000 from April 2028, pulling several hundred thousand more taxpayers into quarterly digital reporting.

In practice it means three things: your records must be kept digitally in compatible software, you must send HMRC a quarterly summary of income and expenses for each business and property source, and you must submit a final declaration after the year end in place of the old self assessment return. Miss the rhythm and the new points-based penalty regime starts to bite. TaxDigit takes the whole cycle off your desk.

The problems we solve for you

Most people caught by MTD are not doing anything wrong — they simply do not have a system that produces reliable numbers four times a year.

• Shoebox records. Spreadsheets and paper receipts that cannot satisfy the digital record-keeping rules.
• Software confusion. Which package is HMRC-recognised, and does it actually suit a property portfolio?
• Quarterly deadlines. Four submission dates per source, per year — plus the final declaration.
• Penalty exposure. Late submission points and late payment penalties accumulate quietly.

Why landlords and sole traders choose TaxDigit

We are chartered certified accountants, not a software reseller. We set the system up around how you actually work, then run it for you.

• Software set-up and migration. HMRC-recognised software chosen, configured and linked to your bank feeds.
• We file, you approve. We prepare and submit every quarterly update and the final declaration.
• Agent authorisation. We act as your HMRC agent, so correspondence comes to us first.
• Tax planning built in. Quarterly data means quarterly foresight — no April surprises.

Who has to join, and when

Your obligation is driven by qualifying income — gross income (not profit) from self-employment plus gross rental income, before expenses.

• From 6 April 2026: qualifying income over £50,000 in the 2024/25 tax year.
• From 6 April 2027: qualifying income over £30,000 in the 2025/26 tax year.
• From 6 April 2028: qualifying income over £20,000 in the 2026/27 tax year.

If you have both a trade and a rental business, the two are added together. Partnerships, and certain individuals such as those without a National Insurance number, are not yet within scope. Some taxpayers can apply for exemption on grounds of digital exclusion.

What we do for you

• Assess whether — and exactly when — you are mandated, using your filed figures.
• Select and set up HMRC-recognised MTD software (Xero, QuickBooks, FreeAgent, or a bridging tool for spreadsheet users).
• Migrate your opening records and build a clean, property-by-property or trade-by-trade digital ledger.
• Prepare and submit four quarterly updates per source, plus the year-end final declaration.
• Review capital allowances, allowable property expenses, finance-cost restriction and the trading and property allowances as we go.
• Handle HMRC correspondence, penalty points and any exemption application.

Thresholds and start dates as at July 2026, per HMRC guidance. We review them at every Budget and Finance Act.

Frequently asked questions

Does Making Tax Digital for Income Tax apply to me?

It applies from 6 April 2026 if your qualifying income — gross self-employment turnover plus gross rental income — exceeded £50,000 in the 2024/25 tax year. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. We can confirm your position from your last filed return in a single call.

What counts as qualifying income?

Gross income before expenses from self-employment and from property, added together. Employment income, dividends, pensions and savings interest do not count towards the threshold, although they are still reported in your final declaration.

How many times a year will I have to file?

Four quarterly updates for each business or property source, followed by one final declaration after the tax year ends. The final declaration replaces the self assessment tax return you file today.

Do I still pay my tax at the same time?

Yes. The payment dates are unchanged — 31 January and, where applicable, 31 July payments on account. MTD changes how you report, not when you pay.

Can I keep using spreadsheets?

Only if they are linked to HMRC through bridging software that can transmit the quarterly updates digitally. In most cases a proper cloud package is cheaper and far less fragile. We will tell you honestly which route suits you.

What are the penalties for getting it wrong?

Late quarterly updates attract points under HMRC’s points-based regime, with a financial penalty once the threshold is reached, and separate late-payment penalties and interest apply to tax paid late. Consistent, on-time filing is the cheapest form of tax planning.

Can TaxDigit act as my agent for MTD?

Yes. We register as your agent with HMRC, hold the software in our practice environment where appropriate, prepare every submission and send it to you for approval before filing.