Making Tax Digital

Taxpayers with an annual turnover between £30,000 and £50,000 will join the scheme from April 2027. Those with turnover of £20,000 will be required to comply from April 2028.

Other income, such as PAYE employment, dividends or interest are not included in the quarterly returns but must be declared in the Annual Declaration. Self-employed individuals who are VAT registered and already complying with MTD for VAT will also need to comply with MTD for income Tax. Property landlords who receive UK or overseas rental income from private commercial or holiday lettings must comply as do individuals with more than one business. In their latter situation, separate submissions for each business are required.

The move to MTD for Income Tax will bring about some significant changes to how HMRC records and calculates income tax, but it should also help taxpayers to have better visibility, sooner, on how much tax they need to pay.

Rather than individual taxpayers submitting one Self-Assessment tax return each year, which is currently done by filing either a paper based return or online return, from 6 April 2026 it will be mandatory for relevant individuals to:

- keep digital records of their self-employed and/or property rental income and expenditure

- Use HMRC recognised MTD compatible software; • submit quarterly (not annual) income and expenditure updates to HMRC

- report any relevant accounting adjustments and allowances;

- submit a statement confirming all other sources of income have been filed

- submit the Final Declaration and pay any tax owing to HMRC by 31 January.

Each quarter relevant taxpayers will be required to make a digital submission of their turnover and expenditure for the past three months. For those whose annual income is likely to be less than the VAT threshold, currently £90,000, they are required to file a turnover figure and one consolidated expense figure each quarter. However, income Taxpayers with an annual turnover that is likely to be equal to or greater than the above VAT threshold will be required to provide categorised expense figures.

After each quarterly submission, HMRC will issue an estimated tax bill to individuals based on the information provided. This will enable taxpayers to budget and plan for their future tax bill.

For those required to do MTD, a Final Declaration Form replaces the current self-assessment system. This Final Declaration requires details and any adjustments to the quarterly returns already filed together with details of any other income such as salary, interest and/or dividends.

For those taxpayers where MTD is compulsory from April 2026, now is the time to consider how to operate the system. It is necessary to decide whether to use an accounting package or to purchase MTD compatible bridging software.

For further information, contact Seamus McCaffrey on 028 8224 1515.