Making Tax Digital (MTD) for Income Tax
As of April 2026, any taxpayer with combined rental income and income from self-employment over £50,000 in 2024-25 will be required to join MTD for Income Tax.
These changes are related to income, not profit. They also do not include limited companies or income from partnerships.
What are the main changes?
The main change is the submission of data on these two sources of income to HMRC. Currently, there is a 10-month window in which to submit this data. This runs from 6th April after the end of the tax year, to the following 31st January. This will change so taxpayers will be required to submit a summary of income and expenditure to HMRC every 3 months. This will commence with the period April – June 2026, due to be submitted by 7th August 2026.
A further change requires taxpayers to keep records relating to this income digitally. Whilst this sounds like a big change, in reality, it means that if you already use an accountant this is probably already being done. Paper/electronic records that you provide your accountant with will already be turned into digital records and will continue to comply.
What challenges may I face with MTD for Income Tax?
Challenges may come if you already use some form of electronic software to hold your accounting records. Once your records are in this format, they must remain in this format. Then they should use digital links to get to your MTD-reporting software. This sounds like it could require significant work – speak with your accountant and they can help ensure this process is followed. Many software options already have export functions to enable this process, which will comply with HMRC regulations.
Will there be any other changes?
Whilst the changes above may not apply to your current circumstances, HMRC is lowering the threshold to £30,000 for the following year. They are also aiming for a £20,000 threshold before the end of the current parliament. So, it’s important to keep an eye on your combined turnover from both sources every year. If you have an accountant, this is something they should do for you. You can get ahead of these future changes by making yourself MTD compliant sooner.
How is BAS preparing for MTD for Income Tax?
The team at BAS has been working behind the scenes for the past few years in readiness for these changes. Our team will be speaking with every client that will fall into the MTD for Income Tax banding to ensure records are provided, you’re compliant and deadlines are met.
As part of MTD for Income Tax, accountants will now have to submit quarterly returns within 1 month of the quarter ending. This is shortening your accountant’s window from 10 months to 4 months. With submissions taking place in July, October, January and April every year, accountants will be under more pressure across the year.
The BAS team will be speaking with all clients to ensure they understand how we are going to support these new HMRC requirements. Plus we will be working on how we’re going to minimise the impact of an increased workload within the business. This comes without increased income to invest in additional resources – something the whole accountancy industry will be working to manage.
If you’d like to understand more about MTD for Income Tax please contact us here or on 01296 681341.
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