Making Tax Digital for Income Tax (MTD IT) is set to be phased in from April 2026, and HMRC has begun contacting taxpayers who are likely to be within scope. Despite previous postponements, there’s strong confidence that the implementation will proceed as scheduled this time.
High-level discussions between HMRC and tax and accountancy professional bodies support this timeline. With MTD IT expected to reduce errors and help close the tax gap, the government appears committed to moving forward. Additionally, MTD IT is a crucial component of HMRC’s new Enterprise Tax Management Platform, making it essential to the modernization of HMRC’s digital infrastructure.
What Does MTD IT Involve?
The initiative consists of three key components:
- Digital record keeping – maintaining compliant digital accounting records
- Quarterly filing – submitting updates to HMRC every three months that summarize business income and expenses (these must flow directly from digital records without manual input)
- End of year finalization – completing a year-end process to finalize tax positions
Implementation Schedule
The rollout will follow a phased approach based on income levels:
- April 2026: Mandatory for self-employed individuals and landlords with gross qualifying income exceeding £50,000
- April 2027: Extended to those with income above £30,000
- April 2028: Further extended to include those with income above £20,000
Partnerships are expected to join MTD IT at a later date, though this timeline has not yet been specified.
Exemptions and Special Cases
Limited exemptions apply either automatically or with notification to HMRC. Additionally, certain taxpayers will have deferred entry to MTD IT. These include individuals who submit residence/remittance basis pages with their tax returns (SA109), who won’t be required to join until April 2027.
Preparing for MTD IT
MTD IT represents a significant shift in how taxpayers interact with HMRC and how frequently these interactions occur. It will fundamentally transform the annual timetable for accounts preparation. The scale of this change cannot be overstated, making it prudent to begin preparations now.
If you’re unsure how this will affect you and your business, please don’t hesitate to get in touch with our MTD team. Call 01905 777600 or email MTD@ormerodrutter.co.uk
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