Making Tax Digital for Income Tax

HMRC are introducing a new regime called Making Tax Digital for Income Tax (MTDfIT) from April 2026.

What is Making Tax Digital for Income Tax?

If you’re an unincorporated sole trader or landlord with a combined turnover of £50,000 or more, you’ll need to supply records to HMRC on a quarterly basis using an HMRC approved software solution. You’ll still only need to pay your tax once or twice a year, as per your current schedule.

From April 2027, the MTDfIT regime will be extended to include unincorporated sole traders or landlords with a turnover of £30,000 or more.

What will change under MTDfIT?

1. Quarterly submissions

The first that is on the way is that income records will need to be submitted quarterly instead of just once per year. From April 2026, the deadlines for the quarterly submissions will be as follows:

7th August
7th November
7th February
7th May

At the end of the tax year, you will need to submit a final tax declaration by 31 January following the end of the tax year. At this point any adjustments can be made to your records. This final tax declaration will replace your current annual self-assessment tax return. As with the existing system, you will only need to pay your tax once or twice a year, as per your current schedule

2. You must submit using an HMRC compatible software

The second key change is that from April 2026, if you fall within the MTDfIT regime, you will only be allowed to submit your tax information to HMRC using one of their approved software packages.

How do I know if I need to start making quarterly digital submissions to HMRC?

If you are an unincorporated sole trader or landlord and your 2024-2025 self-assessment tax return (submitted by 31 January 2026) reported qualifying turnover of more than £50,000, HMRC will contact you by letter to confirm that you must start using MTDfIT from 6 April 2026.

If your combined turnover from property and/or self-employment is less than £50,000, you will not be affected by the changes. However, it’s important to remember that all unincorporated sole traders and landlords whose combined turnover is more than £30,000 will be required to comply with the changes from April 2027.

You can check if you qualify for MTDfIT through HMRC’s checker tool. HMRC may also send you a ‘pre-mandation’ letter from April 2025 if they believe you could be within MTDfIT.

What happens if I don’t comply with the Making Tax Digital for Income Tax changes?

These changes are mandatory and if you are required to complete quarterly filings, you will no longer be able to file your tax return information using the annual alternative method.

HMRC will use a points system for those who don’t comply with the new regime. Once a certain number of points have been applied to your account, you’ll receive an automatic fine of £200. Points will be given for late payments as well as late submissions. Any points you accrue will be valid for two years and will then be removed from your account. If you receive a fine, HMRC requires a 12-month period of full compliance before the points are removed. There will also be a one-off fine given to those who fail to use compatible software to file their returns.

How we can help

We do not expect to take on new clients specifically for MTDfIT services, but if you are interested in our broader private wealth services, please contact your local BDO office to discuss how we can help you with your tax compliance and planning.