With just one month to go before the first tranche of individuals are required to sign up to MTD for income tax, HMRC is writing to taxpayers it believes might be affected.
From April 2026, sole traders and landlords with qualifying income above £50,000, based on the information included in their 2024-25 self assessment tax return, will be required by law to join Making Tax Digital for income tax (MTD IT). Broadly, ‘qualifying income’ is combined income from trading and/or property (eg rental income) before deducting expenses.
MTD IT will extend to those with qualifying income over £30,000 from April 2027 and over £20,000 from April 2028. Income received from trading via a limited company or partnership is outside the scope of MTD IT and should not be counted towards your qualifying income.
This is a fundamental change to the way sole traders and landlords report their results to HMRC and will eventually apply to almost everyone who receives income from self-employment and/or property.
To comply with MTD IT, taxpayers will need to use software; apps; or spreadsheets to keep digital records; file quarterly summaries of their income and expenses; and complete a final annual submission of taxable profit for the accounting period at the end of the year. This will gradually replace the current self assessment tax return. HMRC is not providing its own platform for submitting updates and returns, so you will need to use third-party software. We can help you choose the right package for your business.
If you have received a letter from HMRC about MTD IT, we can help you calculate your qualifying income to determine whether you need to join and when. If you think your qualifying income for 2024-25 is over £50,000, do not wait to receive a letter from HMRC. Contact us today and we can help you sign up in good time and ensure you meet your filing obligations.
