What Is Making Tax Digital for Income Tax (MTD IT) and Why Should I Care?

Making Tax Digital for Income Tax (MTD IT) is HMRC’s way of changing how self-employed people and landlords report their income. Instead of completing one Self Assessment tax return each year, you’ll be required to keep digital records and send regular updates to HMRC using approved software. The idea is to reduce mistakes, improve accuracy, and stop people being hit with unexpected tax bills at the end of the year. HMRC’s official overview can be found here:https://www.gov.uk/government/collections/making-tax-digital-for-income-tax

MTD IT applies to sole traders, self-employed individuals, and landlords. If your total gross income from self-employment and/or property is more than £50,000 a year, you’ll need to follow the new rules from April 2026. If your income falls between £30,000 and £50,000, MTD IT will apply from April 2027. If you’re below £30,000, it isn’t mandatory yet, but HMRC has said this may change in the future. You can check eligibility here:https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax

Under MTD IT, reporting is spread throughout the year. Instead of submitting everything in January, you’ll send four quarterly updates summarising your income and expenses. These updates are not tax bills and no tax is calculated at this stage. They are simply snapshots to keep HMRC informed. HMRC explains quarterly updates in more detail here:https://www.gov.uk/guidance/send-quarterly-updates-for-making-tax-digital-for-income-tax

After the tax year ends, you’ll submit an End of Period Statement (EOPS). This is where proper accounting adjustments are made, such as capital allowances and year-end corrections. Each business or rental income source needs its own EOPS. Once that’s done, you’ll submit a Final Declaration, which replaces the traditional Self Assessment tax return. This final step pulls everything together, applies allowances and reliefs, and confirms the actual tax you owe. HMRC guidance on this process is available here:https://www.gov.uk/guidance/submit-your-final-declaration-for-making-tax-digital-for-income-tax

To comply with MTD IT, you’ll need MTD-compatible software. Paper records and basic spreadsheets won’t be enough on their own. Most modern bookkeeping software already supports MTD IT, and HMRC maintains a list of approved options here:https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax

The easiest way to prepare for MTD IT is to move to digital bookkeeping early, keep records reasonably up to date, and get used to reviewing your numbers quarterly. HMRC strongly recommends preparing in advance rather than waiting until it becomes mandatory. Their preparation guidance can be found here:https://www.gov.uk/guidance/get-ready-for-making-tax-digital-for-income-tax

While MTD IT does mean more frequent reporting, many people find it actually reduces stress once they’re set up properly. You get a clearer picture of your income, fewer last-minute surprises, and more control over your tax position during the year. The biggest problems usually come from leaving things too late, not from MTD IT itself.

If you’re self-employed or a landlord and unsure how MTD IT will affect you, getting advice early makes a big difference. With the right setup and support, it’s very manageable — and often easier than the old once-a-year scramble.

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