Making tax digital (MTD) for income tax

Making Tax Digital for Income Tax – what do I need to do?

From April 2026, HMRC will require individuals with qualifying income over £50,000 to keep digital records and submit quarterly updates via compatible software.

Qualifying income includes:

• Self-employment turnover
• Gross rental income (UK and foreign)

The £50,000 threshold is based on total qualifying income. For example, £30,000 from self-employment and £20,001 from rent would trigger the requirement.

Submission requirements:

• Minimum of 5 submissions per year (4 quarterly + 1 final).
• If you have one self-employment and UK only rental income: 9 submissions (2 updates per quarter).
• More submissions may be needed for multiple trades or foreign properties.

The threshold applies based on your 2024/25 Tax Return. It will later reduce to £30,000, then £20,000.

What does this mean for me?

It depends on how you currently manage your records and whether you use an accountant. Now is the time to start planning your approach.

I already use online accounting software (for example Xero, FreeAgent, QuickBooks)

• If your software is HMRC-approved (see approved list) , you can continue using it.
• Confirm with your accountant who will handle submissions and what the associated costs are.
• If you usually file your own Self Assessment via Government Gateway, check your software supports final declarations—otherwise, you’ll need different software or professional help.
• Government Gateway Tax Return filing will no longer be available for you once you are mandated for MTD for Income Tax (MTDITSA).

I already use online accounting software but it’s not on HMRC’s approved list

• Contact your provider to ask if they plan to become MTD-compliant before your start date.
• If not, you’ll need to switch to compliant software.

I use a Spreadsheet to keep my records

• You can still use spreadsheets. You’ll need bridging software to submit quarterly updates.
• Bridging software does not support final submissions (Tax Returns). So, if you usually file yourself, you’ll need additional software or an adviser.
• Alternatively, consider moving to full bookkeeping software and speak to an adviser about the best fit.

What costs might you face if you need to change your current setup?

Costs will depend on how much you want to do yourself vs. using an adviser.

If you already use bookkeeping software but want help with quarterly submissions:

• Many accountants charge around £100 + VAT per quarter, though this varies depending on support needed.

If you need to start using bookkeeping software:

• Reputable software (e.g. Xero, QuickBooks) typically costs £10–£15 + VAT per month.
• Free options exist (see  HMRC’s approved list), but pricing can change.

If you use spreadsheets:

• Free bridging software is currently available for quarterly updates.
• However, bridging software won’t support Final Submissions—you’ll need additional software or an adviser for this.

Cost of Final Return support:

• LKA’s fees for preparing the Final Return (including one sole trade or up to two rental properties) start from £525 + VAT.

Top Tips for Preparing for MTD for Income Tax (MTD ITSA):

1. Align your VAT quarters with the tax year – This can simplify your reporting if you’re VAT registered.
2. Use separate bank accounts – Keep a dedicated account for each source of qualifying income (e.g. self-employment, rental) to make tracking easier.
3. Start exploring your options now – Research software and processes, then speak to an adviser to find the best fit for your needs.
4. Budget for the extra costs – There may be new software, submission, and adviser fees to consider.
5. Set up your Government Gateway account (if you don’t already have one):  Register here

Will tax payment deadlines change?

No. HMRC has confirmed that the usual Income Tax and NIC payment deadlines remain 31 January and 31 July.

When are MTD ITSA submissions due?

Is there any way to avoid MTD ITSA?

There are some limited options, but professional advice is essential:

• Set up a partnership (currently exempt from MTD)
• Incorporate your business or property income
• Keep income below the threshold (Note: the threshold will drop to £30,000 from April 2027)

What should I do next?

LKA is fully up to date with MTD requirements and ready to support you. Simply call us on 020 3915 8585 to find out more.