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Making Tax Digital for Income Tax (MTD for IT)

Making Tax Digital for Income Tax (MTD for IT) is the next stage of modernisation for the UK tax system. Self-employed people will soon need to become compliant with MTD for IT rules and start filing income tax returns digitally.

Who will be affected by MTD for IT?

  • April 2026 – Self-employed people and landlords earning above £50,000 will need to follow MTD for IT rules.
  • April 2027 – Self-employed people and landlords earning between £30,000 and £50,000 will need to become MTD-compliant.
  • April 2028 – Self-employed people and landlords earning between £20,000 and £30,000 will need to become MTD-compliant.

What do you need to submit for MTD for IT?

  1.  Submit four quarterly updates and a Final Declaration: Each quarterly update must contain details of the taxpayer’s income and expenditure, with the Final Declaration containing their finalised end-of-year position for tax.
  2. Keep digital records: Some of your clients might already do this, but you’ll need to make sure everyone who falls within the MTD thresholds meets this standard ahead of the deadlines.
  3. Use MTD-compatible software: Managing and tracking digital records, and sending submissions to HMRC needs to be done with MTD-compatible software (like Xero). Getting clients confident with this software is a must.

The payment deadline for the final declaration is 31st January; the same as the current Self Assessment date.

If you have landlord clients, there are easements for those with joint-owned properties, to make recordkeeping and submissions more straightforward. Check out HMRC’s guidance on easements for landlords.

Is MTD for IT is a good opportunity for clients?

Many will decide to see MTD for IT as a cause for concern, but it really isn’t.

  1. Spend more time with qualified advisors: MTD for IT requires clients to submit quarterly updates which means you’ll be working with your accountant more often. This is a great opportunity to foster deeper relationships and understanding to receive more advice and greater value.
  2. Convert compliance costs into advisory support: More time with your accountant means more time receiving tailored, bespoke advice and support, instead of just paying for compliance services once per year. There is more opportunity to help with your cash flow, tax planning, wider business strategy, growth strategies, risk mitigation, and long-term planning.
  3. Supercharged software: MTD for IT necessitates the use of compatible software, such as Xero. Digital recordkeeping and cloud-based systems speed up repetitive tasks like reconciliation and reporting, reducing manual work, freeing up more time.
  4. Saving clients’ time: MTD-compliant software can even give clients a clearer view of their finances, by importing live bank data and generating forecasts and reports. This can help with financial decision-making and proactive planning.

What can we do to plan for these changes?

  1. Brush up on the rules: keeping up with HMRC updates on MTD for IT should be the first thing you do.
  2. Work with an accountant ready for the changes: Our Agent Services Account (ASA) to sign clients up for MTD for IT is ready to go.
  3. We have sent early notification to clients likely to fall into MTD for IT from April 2026, and will regularly review clients changing circumstances.
  4. Get comfortable with compatible software. Why only introduce bookkeeping software like Xero in April, why not introduce it now to remove any teething issues when it must be active and working seamlessly in the near future.

 

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