Diploma in Professional Accounting
Diploma for Financial Advisers
Member of London Institute of Banking and Finance

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Making Tax Digital (MTD) is HMRC’s plan to move all UK tax reporting online using special software. The answer to whether it’s compulsory depends on what type of tax you pay and your income level.

Making Tax Digital for VAT – Already Compulsory

Yes, MTD for VAT is compulsory for most businesses right now.

MTD for VAT became mandatory for:

• All VAT-registered businesses from April 2022
• This applies regardless of how much money your business makes
• You must use MTD-compatible software to keep records and submit VAT returns

Previously, only businesses with turnover above the VAT threshold (now £90,000) had to use MTD for VAT. But since April 2022, all VAT-registered businesses must use it.

Making Tax Digital for Income Tax – Coming Soon

MTD for Income Tax will become compulsory from April 2026.

Who will need to use it:

• Sole traders (self-employed people)
• Landlords who rent out property
• People with combined income from self-employment and property over £50,000 per year

The income threshold is based on your 2024-25 tax return. HMRC will send letters to people who need to start using MTD before April 2026.

Future Changes for Income Tax MTD

The income threshold will get lower over time:

• April 2026: £50,000 threshold
• April 2027: £30,000 threshold (planned)

This means more people will need to use MTD as the threshold drops.

What You Need to Do

If You’re VAT Registered

You must already be using MTD for VAT. This means:

• Keep digital records using compatible software
• Submit VAT returns through the software
• No more paper or basic online submissions

If You’re Self-Employed or a Landlord

• Check if your income will be over £50,000 for 2024-25
• If yes, start preparing now for MTD from April 2026
• Choose compatible software
• Learn how to keep digital records

If Your Income is Below the Threshold

MTD for Income Tax is not compulsory if your qualifying income is below £50,000. However, you can choose to use it voluntarily if you want to.

What is MTD-Compatible Software?

MTD-compatible software can:

• Connect directly to HMRC systems
• Send your tax information digitally
• Keep records in the right format

HMRC has a list of approved software on gov.uk. Some software is free, while others charge fees.

Key Dates to Remember

• April 2022: MTD for VAT became compulsory for all VAT-registered businesses
• April 2026: MTD for Income Tax starts for those with qualifying income over £50,000
• April 2027: MTD for Income Tax threshold drops to £30,000

Getting Ready for MTD

Start preparing now if you think MTD will affect you:

1. Check your income levels – Add up your self-employment and property income
2. Research software options – Look at HMRC’s list of compatible software
3. Organise your records – Make sure your business records are up to date
4. Consider getting help – Talk to an accountant or tax adviser

More Information

For the latest information and guidance, visit:

• Making Tax Digital for Income Tax on gov.uk
• Check if you need to use MTD for Income Tax

The government says MTD will make tax reporting easier and reduce mistakes. Many businesses using MTD for VAT report that it helps them prepare returns faster and with more confidence.

Bottom line: MTD is already compulsory for VAT. For Income Tax, it becomes compulsory from April 2026 if your qualifying income is over £50,000.

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