Do I Have to Use Making Tax Digital ? UK MTD for Income Tax Rules Explained

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 a UK government initiative designed to streamline tax administration. If you’re a sole trader or landlord, you might be asking, “Do I have to use Making Tax Digital?” The answer depends on your total income from self-employment or property.

MTD for Income Tax is being introduced in phases, so it’s crucial to understand if and when the rules apply to you. This guide breaks down the requirements, key dates, and exemptions.

Who Needs to Use MTD for Income Tax?

You will be required to use Making Tax Digital for Income Tax if you are registered for Self Assessment and your total ‘qualifying income’ from self-employment or property is above a certain threshold.

Your qualifying income is the combined gross income from your UK and foreign property businesses and your UK and foreign self-employment businesses.

Making Tax Digital for Income Tax: Key Dates and Thresholds

The date you must start using MTD depends on your qualifying income from a previous tax year.

• From 6 April 2026: You must use MTD if your qualifying income was over £50,000 for the 2024 to 2025 tax year.
• From 6 April 2027: You must use MTD if your qualifying income was over £30,000 for the 2025 to 2026 tax year.
• From 6 April 2028 (Planned): The government plans to lower the threshold, requiring you to use MTD if your qualifying income was over £20,000 for the 2026 to 2027 tax year.

The timeline for business partnerships to join MTD for Income Tax will be confirmed at a later date. While you don’t have to join MTD until after you submit your first Self Assessment tax return, you have the option to sign up early.

Who is Exempt from Making Tax Digital for Income Tax?

You do not have to use MTD for Income Tax if your qualifying income is below the required threshold (£20,000 or less, based on current plans).

Additionally, you are exempt if you:

• Meet specific conditions that make you automatically exempt.
• Have successfully applied for an exemption from HMRC.

If you are not required to use the MTD service, you must continue to file your annual Self Assessment tax return as normal.

How to Prepare for MTD for Income Tax

If the MTD for Income Tax rules apply to you, it is your responsibility to be ready before your mandatory start date.

1. Check Your Qualifying Income: HMRC will review your Self Assessment tax return to check your income, but you should also monitor this yourself to know when you will need to join.
2. Choose Compatible Software: MTD requires you to keep digital records and submit updates to HMRC using compatible software. You must choose a software provider that meets MTD requirements.
3. Authorise Your Software: Once you have chosen your software, you will need to connect and authorise it with HMRC.
4. Speak to Your Agent: If you use a tax agent or accountant, discuss how they will manage your MTD submissions on your behalf.

By preparing early, you can ensure a smooth transition to Making Tax Digital and stay compliant with your tax obligations.

References

[1] Find out if and when you need to use Making Tax Digital for Income Tax – GOV.UK

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