Kirk Rice Blog

Making Tax Digital (MTD) For Income Tax: Important Changes Taking Effect From April 2026Written on March 28, 2025 by Hadley Baldock

The government and HMRC are pressing ahead with an overhaul of the UK tax system, to reduce the tax gap by improving HMRC systems and security, and modernising data collection and communications with taxpayers. Making Tax Digital (MTD) aims to promote better and more timely record-keeping in the expectation that it will reduce errors and mistakes.

Who is affected by Making Tax Digital (MTD)?

New tax law is now in place which will take effect from April 2026 and will be obligatory to the following individuals:

• Landlords and other individuals with gross qualifying income of £50,000 or more from all UK properties.
• UK tax resident individuals with gross qualifying income of £50,000 or more from overseas properties.
• Self-employed sole trade business owners with gross qualifying income of £50,000 or more (income from limited companies and partnerships can be ignored).
• Individuals with combined gross qualifying income from all property and self-employed sole trade businesses of £50,000 or more.

‘Gross qualifying income’ is property income or sole trade turnover before the deduction of expenses.

The £50,000 threshold will fall to £30,000 from April 2027, and to £20,000 from April 2028.

If you receive income from a jointly owned property, you only need to consider your share of the gross rental income when considering the above thresholds.

HMRC will be writing to individuals whom they believe may be affected by the first wave under the new rules (based on what was declared in their 2023/24 tax return). It is, however, your 2024/25 gross qualifying income that may bring you into MTD.

What are the Making Tax Digital requirements?

• Keep digital records of all income and expenses using MTD compatible software.
• Submit quarterly updates of property or business income and expenses digitally to HMRC.
• ​Submit a ‘final declaration’ of your other sources of income and capital gains – if you are within the scope of MTD, this declaration will replace your self-assessment tax return (although in practice the work required to do this will be unchanged from the current tax return process).

The tax payment deadline remains 31^st January following the end of the relevant tax year, and the payment on account regime remains unchanged. There are currently no plans to move the quarterly tax payments, but the new rules are designed to help people budget for their tax liabilities.

A new penalty regime comes into force for the late or non-filing of quarterly updates or the final declaration.

How can Kirk Rice LLP help with the new MTD requirements?

Making Tax Digital (MTD) is a once-in-a-generation shift in the way things are done and may require changes to the types of records you maintain and the frequency of reporting to HMRC.

We as your agent will be doing the following over the next few months to help you prepare for the new reporting regime:

• Recommending MTD-compatible software to ensure it meets HMRC’s requirements and offering bookkeeping services to ensure that your financial information is accurate and ready for the quarterly update submissions.
• Agreeing the service level you will require.
• Registering you for MTD with HMRC or applying for formal exemption if you meet any of the exemption criteria.
• Answering any questions you may have concerning the new rules – we will publish a ‘frequently asked questions’ page on our website in due course.

What are the next steps?

• HMRC will start to write to individuals they believe will need to register for MTD – registration is not automatic but required by law.
• If you are a client of our firm, we will communicate with you again over the next few months to clarify some of the rules and to set out some choices for you.
• You will then need to decide how you will maintain digital records (either by yourself, by using our firm, or via a third party) and who will undertake the quarterly reporting to HMRC.
• We expect to undertake the final declaration work for our clients as normal (much the same as for self-assessment tax return work).

More information on this will be published in due course as the government and HMRC clarify exactly how the new reporting requirement will work in practice. We have provided a more detail for affected clients in our MTD Hub on our website, including FAQs which will answer some of the questions likely to arise.

To get in touch with us, please email info@kirkrice.co.uk

Please note: This article is correct as at the publication date. The answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of relief from taxation are subject to change. The Financial Conduct Authority does not regulate tax planning.