What is MTD (and MTD for ITSA)?
Making Tax Digital (MTD) is an initiative from HMRC to digitalise the UK tax system which is being rolled out in stages.
Currently, MTD for VAT is mandatory for all VAT registered businesses, above the £85,000 threshold and those that have voluntarily registered for VAT. This means that these businesses must keep records and submit their VAT returns digitally, using Making Tax Digital software that is recognised by HMRC, for example, Quickbooks or Xero.
MTD is now scheduled to be mandatory for individuals and landlords with income over £50,000 from April 2026, known as MTD for Income Tax Self Assessment (MTD for ITSA).
Key points to note
- MTD for Income Tax will now be introduced from April 2026, two years later than previously planned.
- Self-employed individuals and landlords with income over £50,000 will need to be ready to comply from April 2026.
- Those earning more than £30,000 will be mandated to comply in 2027.
- The government will review the needs of self-employed individuals and landlords with income under the £30,000 threshold before laying out any further plans.
- Partnerships will not be brought into MTD for Income Tax in 2025 as previously planned, but the government “remains committed to introducing MTD for Income Tax to partnerships at a later date”.
- A new penalty system designed to align penalties for MTD for Income Tax with those for MTD for VAT will come into effect for taxpayers when they are required to comply with MTD for Income Tax. You can see details of the new penalty system for MTD for VAT here and further details of the MTD for ITSA penalty scheme is expected ahead of the roll out date.
- We anticipate that most taxpayers within the scope of MTD for ITSA will be able to sign up voluntarily before they are mandated to do so.
We say
We will continue to support our clients by helping them implement and maintain digital records and preparing them to sign up ahead of when they are required to comply with MTD requirements. If you have any questions, please do contact our team.
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