The UK government is continuing its step-by-step digital transformation of the tax system. In our first article, we covered Making Tax Digital for Corporation Tax (MTD for CT). Now, it’s time to focus on Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).
This reform directly affects self-employed individuals and landlords, requiring them—just like companies—to keep digital records and submit quarterly updates to HMRC, making tax compliance more transparent and manageable.
The phased implementation starts April 2026. This guide explains what MTD for Income Tax is, who will be affected, how to prepare, and the benefits of the change.
📂 What Is MTD for Income Tax?
MTD for Income Tax is part of the UK government’s broader digital tax reform. Its goal is to reduce errors, eliminate manual processes, andæ modernize the tax system.
Affected taxpayers will need to:
- Keep digital records of income and expenses
- Submit quarterly updates to
- HMRC using MTD-compatible software file a Final Declaration at the end of the tax year
Who Will Be Affected?
MTD for Income Tax mainly applies to:
- Self-employed individuals 🧑💻
- Landlords with rental income 🏠
The rollout will be phased based on total annual income:
📌 6 April 2026 → Income over £50,000
📌 6 April 2027 → Income over £30,000
📌 6 April 2028 → Income over £20,000
(Income includes both self-employment and rental income.)
❌ Individuals earning below £20,000 are currently out of scope.
📑 Key Requirements of MTD for Income Tax
Digital Record-Keeping
All income and expenses must be stored digitally using MTD-compliant software.
Quarterly Updates
Instead of an annual return, taxpayers must submit quarterly income and expense updates.
Final Declaration
After the tax year, a final declaration confirms the actual totals.
Penalty System ⚖️
HMRC will implement a points-based penalty for late or missing submissions. Accumulating points leads to financial penalties.
Benefits of MTD for Income Tax
🔹 Reduced errors – Eliminates manual entries and lowers the risk of mistakes.
🔹 Transparency – HMRC can monitor income and expenses throughout the year.
🔹 Better financial management – Quarterly reporting improves cash flow control.
🔹 Digitalisation opportunities – Modern accounting software streamlines processes.
What It Means for Accountants
- Workload spreads across four quarterly submissions 📊
- Clients require more frequent support 🤝
- Advisory and strategic services gain more importance 💡
This reform encourages closer collaboration between accountants and taxpayers.
How to Prepare
Step 1: Choose Compliant Software
Select HMRC-approved software (e.g., Xero, QuickBooks, Sage, FreeAgent).
Step 2: Digitise Records
Store all income and expenses digitally as early as possible.
Step 3: Understand the Penalty System ⚖️
Learn about points-based penalties and set internal processes to avoid missed deadlines.
Step 4: Stay in Contact with Your Accountant 📢
Professional support during quarterly reporting and final declaration ensures smooth compliance.
Challenges
Increased reporting workload
Costs for new software and training
Adjusting to digital processes
Early preparation makes it easier to overcome these challenges.
Conclusion
Making Tax Digital – Part 2 marks a major transformation for Income Tax in the UK. The phased rollout for self-employed individuals and landlords begins in 2026 and will gradually include a wider group.
In our first article, MTD for Corporation Tax focused on companies; this article addresses MTD for Income Tax for individuals. Together, they illustrate the UK’s complete digital tax roadmap for both businesses and individuals.
📌 Key Takeaways:
- Digital record-keeping is mandatory for self-employed and landlords.
- Quarterly income and expense reporting is required.
- Points-based penalty system ensures timely compliance.
- Choosing the right software and early preparation simplifies the process.
Transition to digital tax solutions today to strengthen financial management and prevent compliance issues. Act now, digitise your records, and be ready for this transformation. 🚀
