Making Tax Digital For Income Tax

What is Making Tax Digital for ITSA?

Making Tax Digital (MTD) is changing how self-employed people and landlords report their income and expenses. Unlike the old Self Assessment system, where you reported everything once a year, MTD requires keeping digital records throughout the year and sending updates to HMRC every three months.

How MTD Works

With MTD, your accounting software keeps track of all your income and expenses for each business or property automatically. Every three months, your software totals this information into a quarterly update, which is then sent to HMRC. The software does the calculations based on the information you have entered so good bookkeeping is essential.

At the end of the tax year, after your fourth quarterly update, your software will show a complete picture of your income and expenses. Before submitting your final tax return, you may need to:

Remove items that aren’t allowed as business expenses (for example, personal costs you tried to claim).
Include costs that belong to this year even if you’ve paid them in advance or will pay them later.
Adjust your records if your accounting period doesn’t match the standard tax year (1 April to 31 March).
Claim any reliefs or allowances you’re entitled to, like deductions for equipment you’ve bought or income from renting out a room.

Finally, you complete and submit your tax return digitally. You must send it by 31 January after the end of the tax year, though you can submit earlier if your records are ready. Sending it on time avoids late penalties and keeps your records correct.

When Do You Need to Start Using MTD for Income Tax?

The date you need to start using MTD depends on your qualifying income in a given tax year. Specifically:

For the 2024–2025 tax year: if your income is over £50,000, you must start using MTD from 6 April 2026.
For the 2025–2026 tax year: if your income is over £30,000, MTD becomes mandatory from 6 April 2027.
For the 2026–2027 tax year: the government plans to introduce legislation lowering the threshold to £20,000.

In other words, the higher your income, the sooner you’ll need to comply.

Future Requirements

Looking ahead, business partnerships will also be required to use Making Tax Digital for Income Tax. The government will provide a clear timeline, and we will update you as soon as the legislation is confirmed.

How We Can Help You with Making Tax Digital

Making Tax Digital can feel overwhelming, especially if you’re new to running a business. At JDH, we make the process straightforward and stress-free, so you stay compliant and confident. Here’s how we can support you:

Choosing the right MTD software – We’ll help you select software that fits your business, so keeping digital records is easy and accurate.
Bookkeeping support – We can guide you on maintaining your records, or take care of the bookkeeping entirely for you. Learn more about our Bookkeeping Services
Quarterly submissions – We’ll check your records and submit your updates to HMRC on time, reducing the risk of errors or missed deadlines.
Final tax submission – At the end of the year, we’ll prepare and submit your tax return, making sure you’ve claimed all the reliefs and allowances you’re entitled to.
Accuracy checks – If you manage your own bookkeeping, we can review your records to ensure everything is correct before it’s sent to HMRC.

By letting us help, you can focus on running your business while knowing your MTD responsibilities are handled correctly and on time.

Are You Ready to Make Tax Digital?

It’s just around the corner, so don’t wait! Contact us today to make sure you’re all set and prepared for MTD.