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Making Tax Digital For Income Tax Self Assessment (MTD)

Making Tax Digital (MTD) for Income Tax Self Assessment is a ‘once in a generation' change to the way tax is administered in the UK. It is designed to encourage the digitisation of business records and the tax process, increasing efficiencies and reducing human error, and to help business and property owners understand how profitable (or otherwise) their businesses are. Following a recent HM Treasury announcement, the implementation of MTD will be delayed for a further two years, taking effect from 6 April 2026.

MTD started with VAT and now all VAT registered businesses are compliant with the rules.

The next phase is to bring in certain groups of taxpayers who are currently subject to the Income Tax regime.

New tax law is now in place which will take effect from 6 April 2026 and will be obligatory to the following:

  • Landlords with annual gross rental income from all properties of £50,000 or more
  • Self-employed unincorporated business owners with an annual gross turnover of £50,000 or more
  • Taxpayers with combined gross income from any of the above of £50,000 or more

If you receive rental income from a jointly owned property, you only need to consider your share of the gross rental income when considering whether or not you exceed the £50,000 threshold.

The above £50,000 threshold will then be lowered to £30,000 from 6 April 2027 (under current proposals).

In brief, the new law will require affected taxpayers to do the following:

  • Keep digital records of all income and expenses using MTD compatible software
  • Submit quarterly updates of rental or business income and expenses digitally to HMRC
  • Submit a ‘final declaration’ – if you are within the scope of MTD, this declaration will replace your self-assessment tax return and is the point at which you disclose all other sources of income and capital gains not within the scope of the quarterly updates

General partnerships, limited companies, LLPs and more complex partnerships will have a later MTD start date, yet to be announced. Trusts, estates, trustees of registered pension schemes and non-resident companies are, at present, not within the scope of MTD so do not need to follow the requirements.

If you are resident and domiciled in the UK, then you will need to include your overseas rental income in the MTD submissions.

If you are a non-UK resident or are a non-UK domiciled UK resident claiming the remittance basis of taxation, only your UK sources of income will be within the MTD rules. Landlords (usually non-UK resident overseas nationals) who do not have a National Insurance number will be outside the scope of MTD and will continue to declare their rental income in their self assessment tax return.

You may apply for an exemption from MTD if you are considered to be ‘digitally excluded’ and it is not practical for you to use software to keep digital records or to submit them digitally due to your age, disability, location or other reason. Any exclusions are likely to be extremely limited in scope and for most people, it is expected that you will need to appoint an accountant or tax adviser to undertake the work for you.

More information concerning MTD will be made available here as and when it is published by HMRC. If you are a client of Kirk Rice LLP we will be contacting you in due course to discuss these changes and the options available to you. Please bear with us whilst we work through the impact of these changes.

You can find out more on the Government website.




Any reader interested in discussing this topic further should email info@kirkrice.co.uk to arrange a call with our tax specialists.

Updated 27 March 2024