What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax is HMRC's new digital tax system requiring self-employed individuals and landlords to keep digital records and submit quarterly income and expense summaries to HMRC using approved software, instead of filing a single annual self assessment tax return.
Who does MTD for Income Tax affect?
MTD for Income Tax applies to self-employed individuals and landlords whose qualifying gross income exceeds the relevant threshold. From April 2026, the threshold is £50,000. From April 2027, it drops to £30,000, and a further phase to £20,000 is planned for 2028.
When does MTD for Income Tax start?
MTD for Income Tax becomes mandatory from 6 April 2026 for those with qualifying gross income over £50,000. Qualifying income includes gross self-employment turnover and rental income before expenses.
Is MTD based on turnover or profit?
MTD thresholds are based on qualifying gross income, which is your turnover or rental income before any expenses. It is not based on profit.
Do partnerships have to use MTD?
No. MTD for Income Tax does not currently apply to partnerships. HMRC plans to bring general partnerships in at a later stage.
What counts as qualifying income for MTD?
Qualifying income includes gross self-employment turnover and gross property rental income. Employment income, pensions, savings interest, dividends, and capital gains do not count towards the MTD threshold.
When are quarterly MTD submissions due?
Quarterly updates must be submitted by the 7th of the month following the end of each quarter. The four quarters run from April 6 to July 5, July 6 to October 5, October 6 to January 5, and January 6 to April 5.
Do I pay tax quarterly under MTD?
No. Quarterly updates are summaries of income and expenses only. Your tax payment dates remain unchanged at 31 January and 31 July. MTD does not change when you pay tax.
What software do I need for MTD for Income Tax?
You must use HMRC-recognised software such as FreeAgent, QuickBooks, Xero, or Sage. GoForma includes FreeAgent free of charge with all packages. Bridging software is also available for spreadsheet users.
What happens if I miss an MTD submission deadline?
A points-based penalty system applies. You receive one point for each late quarterly submission. Accumulating enough points triggers a financial penalty. The final declaration carries a penalty from the first day it is late.
Can my accountant manage MTD on my behalf?
Yes. A qualified accountant can handle software setup, digital record-keeping, quarterly submission preparation, and your final declaration. GoForma manages the entire MTD process for you.
What if my income fluctuates above and below the threshold?
Once you are mandated for MTD, you normally stay in the system even if your income drops below the threshold. You can exit after three consecutive tax years below the threshold.