Making Tax Digital: Requirements and Key Implementation Dates

Making Tax Digital (MTD) is HM Revenue & Customs' (HMRC's) long-term programme to modernise the UK tax system. The goal is to move away from annual paper or manual accounting towards digital record-keeping and regular digital reporting. MTD has already reshaped how many businesses handle VAT, and its scope is now expanding to Income Tax Self Assessment (ITSA).

MTD for Income Tax doesn't apply to everyone immediately — and the start date depends on your qualifying income:

• £50,000+ income: MTD applies from 6 April 2026.

• £30,000+ income: MTD applies from 6 April 2027.

• £20,000+ income: MTD applies from 6 April 2028 (planned).

Qualifying income typically includes gross income from self-employment and property before expenses. Even if you don't receive a letter from HMRC, it's your responsibility to check whether and when you need to join.

MTD changes three main things for affected taxpayers:

1. Digital Record-Keeping - Individuals and businesses must maintain their financial records digitally. This means using HMRC-approved software that can create, store and correct digital records of income and allowable expenses. 2. Digital Reporting -Taxpayers must send regular digital summaries of their income and expenses to HMRC. For Income Tax, this involves quarterly updates, followed by an annual final declaration. 3. Software Compatibility - All submissions must be made using MTD-compatible software that integrates with HMRC's systems. Simple spreadsheets or manual data entries that aren't connected to HMRC won't meet the requirements.

Failing to meet the MTD reporting deadlines can result in penalties under HMRC's new points-based system. Penalty points may lead to financial fines similar to other tax regimes, so staying on top of quarterly deadlines is important. 

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