06 Nov Getting Ready for MTD Income Tax: What You Need to Know

If you’re a taxpayer, a small business owner, or an accountant in the UK, you’ve probably come across the term Making Tax Digital (MTD) for Income Tax.

What is Making Tax Digital (MTD) Income Tax?

Making Tax Digital (MTD) for Income Tax is a government initiative aimed at requiring self-employed and property owners, to maintain digital records using software and report income directly to HMRC, ensuring greater transparency.

For Income Tax, MTD applies to property owners and self-employed individuals with income over a certain threshold, requiring them to submit their financial details digitally.

Who Does MTD for Income Tax Apply To?

MTD for Income Tax affects:

• Self-employed individuals (including sole traders) with annual income of over £50,000 in the tax year 2024-2025.
• Landlords with rental income over £50,000 annually in the tax year 2024-2025.
• Individuals with multiple sources of income (from both above categories) above the £50,000 threshold.

Note: If you’re a salaried employee with no additional income, MTD doesn’t apply to you. However, if you have other income, such as freelance work or property rental, MTD will likely affect you.

If you have income from self-employment and/or property, you’ll be legally required to use MTD for Income Tax – based on the level of qualifying income – from the following dates:

• April 2026: If your qualifying income exceeds £50,000 in the 2024-2025 tax year.
• April 2027: If your qualifying income exceeds £30,000 in the 2025-2026 tax year.
• April 2028: If your qualifying income exceeds £20,000 in the 2026-2027 tax year.

Key-Dates and Timeline

• The full digital reporting requirement for Income Tax will begin from 6 April 2026.
• April 2027 and April 2028: Gradual extension of MTD requirements to lower income thresholds.
• Now is a great time to start preparing: get familiar with digital tools, adjust your systems, and ensure everything is in place well ahead of the deadline.

What Does MTD Mean for You?

If you’re affected by MTD for Income Tax, here’s what it will mean:

• Keeping digital records: You’ll need to store income and expenses digitally (scanned copies & relevant software)—no more paper receipts or handwritten ledgers.
• Quarterly updates to HMRC: Instead of filing your tax return annually, you’ll submit quarterly updates reflecting your income and expenses through relevant software.
• Year-end submission: You’ll still need to submit a final year-end report confirming your total income and expenses.

How to Get Ready for MTD

Follow these steps to make sure you’re ready:

• Choose the right accounting software: Select software that’s MTD-compliant.
• Set up digital records: Begin recording your financial data digitally—scan receipts, use digital invoicing, and keep track of all transactions electronically.
• Stay on top of updates: Keep your records up to date to ensure smooth quarterly submissions.
• Seek professional advice: Consult us to ensure you’re meeting MTD requirements and optimizing your tax position. – we are here to help!

Why Choose Us?

At TAXNET FINANCIAL SERVICES LIMITED we are here to guide you through the process. Here’s how we can help:

• Complete Service: We handle the complete process, from selecting the right MTD-compliant software to ensuring everything is set up and running smoothly, so you can focus on what matters most.
• Ongoing Support: Our team will support you through quarterly updates and year-end submissions to ensure you stay on track.
• Tax Optimization: We’ll help you not only comply with MTD but also find ways to reduce your tax bill and maximize your business’ profitability.

Transitioning to MTD doesn’t have to be stressful. Let us handle the details so you can focus on running your business. Contact us today to schedule a consultation and get your business MTD-ready!