Making Tax Digital for Income Tax Self-Assessment

Making Tax Digital (MTD) for Income Tax will come into force on 6 April 2026 for sole traders and landlords. Making Tax Digital (MTD) ensures that sole traders and landlords report their income and expenses digitally to HM Revenue & Customs (HMRC) in the future.

From 6 April 2026, some sole traders and landlords must use Making Tax Digital for Income Tax but the criteria for whether you need to use this new digital reporting system is based on your total annual income from either self-employment or property income.

In this blog, we’ll cover all you need to know about MTD for Income Tax.

Who needs to sign up for Making Tax Digital for Income Tax?

You must use Making Tax Digital for Income Tax from 6 April 2026 if the following criteria apply:

• You are an individual currently registered for Self Assessment with HMRC.

• You earn property income or income from self-employment, or both.

• You earn qualifying income of more than £20,000 (qualifying income is the total income you get in a tax year from self-employment and/or property).

Business partnerships will need to use MTD for Income Tax in the future. However, HMRC has not yet confirmed a timeline for this.

Non-UK residents or domiciled individuals must use MTD where they have UK self-employment and/or UK property and meet the turnover threshold.

UK residents must use MTD if they have a foreign property income source that meets the threshold (this will be combined with other self-employed income and/or UK property income).

Who doesn’t need to sign up for MTD for Income Tax?

You do not need to use Making Tax Digital for Income Tax if:

• You meet certain conditions that make you automatically exempt(see more details below).

• You applied for an exemption, which HMRC has approved.

• You have qualifying income of £20,000 or less.

Can I get an exemption from MTD for Income Tax?

Some people will be able to apply for an exemption from using Making Tax Digital for Income Tax. The application process for this is on HMRC’s website.

You can apply for an exemption if:

• You are digitally excluded, and using software to keep or submit digital records is not practical. This could be due to a disability, age, location or another reason.

• You are a practising member of a religious society (or order), and the beliefs of that society are incompatible with keeping electronic records or using electronic communications.

You will be asked to explain to HMRC why you believe you are exempt and your personal circumstances.

If you’ve already been confirmed exempt from Making Tax Digital for VAT returns, you will not need to reapply for an exemption for MTD for Income Tax.

HMRC will look at the information you give them and will write to you to notify you of the following:

• That you’re exempt and what you need to do next.

• If and why you’re not exempt, and how you can appeal HMRC’s decision.

If your application and/or appeal is not successful, you’ll need to sign up for Making Tax Digital for Income Tax by the required date. If your circumstances change and the reason for your exemption no longer applies you must notify HMRC within 3 months.

Who is automatically exempt from MTD for Income Tax?

Automatic exemption will be applied if you are a:

• Trustee (including charitable trustees or trustees of non-registered pension schemes).

• Person who does not have a National Insurance number. This only applies to a tax year in which you did not have a National Insurance number on 31 January.

• Personal representative of someone who has passed away.

• Lloyd’s member, in relation to your underwriting business.

• Non-resident company.

If you are automatically exempt, you will not need to apply for an exemption. However, further exemptions may apply as MTD rules change, so check the HMRC website for more details.

Steps to prepare for Making Tax Digital for Income Tax

1. Work out your qualifying income

The first step is to work out what is or isn’t included in your qualifying income for Making Tax Digital for Income Tax in order to understand if you are required to sign up.

Your qualifying income is the total income in a tax year from self-employment and property.

Other sources of income reported through Self-Assessment, for example, income from employment (PAYE) and dividends, do not count towards your qualifying income.

HMRC will assess your gross income from self-employment or property (i.e. your turnover) before you deduct business expenses.

For example, your total gross income may be:

• £35,000 from rental income

• £25,000 from self-employed income

In this example, your total qualifying income would be £60,000.

2. Work out your Making Tax Digital for Income Tax start date

The date you start using Making Tax Digital for Income Tax will depend on your qualifying income within a tax year. Start dates are as follows:

• From 6 April 2026 - If your qualifying income is over £50,000 for the 2024 to 2025 tax year.

• From 6 April 2027 - If your qualifying income is over £30,000 for the 2025 to 2026 tax year.

HMRC have plans to expand Making Tax Digital for Income Tax to sole traders and landlords with income over £20,000 from April 2028. HMRC will continue to engage with stakeholders before additional legislation is introduced or the criteria are changed.

3. Get a compatible software/digital record-keeping system

There are many suitable software options from different providers that will comply with Making Tax Digital for Income Tax. dns accountants can help you choose the right software for your needs. Any existing MTD-compatible software will need to be connected to your existing HMRC online services account

MTD software packages will be used to:

• Replace an existing spreadsheet system with new MTD-compatible software product to create and store digital records of your self-employed and property income and expenses.

• Submit quarterly updates to HMRC using your new software product.

• Submit your final declaration by 31 January the following year (the final declaration will replace the current annual Self Assessment Tax Return).

dns accountants is an MTD software provider. You can find out more about our MTD compatible accounting software here.

4. Sign up for Making Tax Digital for Income Tax

If you want to sign up now

You can sign up now, but you must still submit a Self Assessment tax return for the 2024 to 2025 tax year.

If you need to sign up in the future

You can sign up to test the service now or continue submitting a Self Assessment tax return as normal and sign up at a later date.

Can I sign up voluntarily?

You may be able to sign up voluntarily. HMRC will ask you some questions to determine if you are eligible for voluntary sign-up.

5. Use Making Tax Digital

After you sign up, it’s time to start using MTD for Income Tax. You can find extra guidance on how to use MTD here. This includes guidance on:

• How do you access the new MTD for Income Tax service?

• Support for MTD.

• Keeping electronic records and data entry guidance.

• Sending quarterly updates.

• Adjusting your self-employment and property income.

• Submitting your self-assessment tax return or final declaration.

• Notifying HMRC of changes of circumstances.

Making Tax Digital for Income Tax Frequently Asked Questions (FAQs)

Does MTD for Income Tax replace self-assessment tax returns?

For those who meet the MTD criteria, the final declaration will replace the completion of the traditional self-assessment tax return. HMRC’s free online self-assessment tax return filing service will not be available to taxpayers in MTD. However, it will still be available for those people exempt from MTD.

Your Income tax payments/payments on account are not affected by MTD. Payment dates remain the same as they were under the traditional self-assessment system, ie tax will be payable by 31 January following the end of each tax year, with payments on account payable for the following year by 31 January and 31 July where relevant.

Will taxpayers with qualifying income below £20,000 have to use MTD in the future?

At the time of writing, nothing has been confirmed regarding MTD for taxpayers with qualifying income below £20,000. However, the Government’s Spring Statement 2025 announced that the intention is to "continue to explore how we can best bring the benefits of digitalisation to a greater proportion of sole traders and landlords who have income below the £20,000 threshold."

What is the best way to comply with MTD’s digital record-keeping requirements?

The best way to comply with MTD for reporting income and updating your income tax position is to use compatible software through a reputable provider such as dns accountants.

What is the best accounting software for MTD?

There are many compatible software providers and packages on the market. Here at dns accountants, we offer our clients free compatible accounting software packages. Find out more about our packages here.

Will Making Tax Digital for Income Tax apply to directors of limited companies and partnerships?

MTD is intended to be rolled out to limited companies, partnerships and limited liability partnerships (LLPs) at some point in the future. However, there are no confirmed timescales for this rollout currently.

Summary

Making Tax Digital for Income Tax is another step in the Government’s aim to modernise and digitise the UK tax service. It is currently in the testing phase, but will be rolled out to self-employed individuals and those with property income from April 2026. If you are self-employed, have property income or other taxable income that makes you eligible for Making Tax Digital for Income Tax in a tax year, you should contact dns accountants today for help and advice on preparing for these changes.

To help with all your tax affairs, contact our MTD specialists today on 03330605328 or e-mail us at enquiry@dnsaccountants.co.uk.

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