HMRC’s Making Tax Digital (MTD) programme has been in development for several years. It’s already in place for VAT returns, and the next phase will extend to Income Tax Self Assessment (IT), with partnerships and Corporation Tax being further down the road.
The first rollout of MTD for Income Tax is scheduled for April 2026, following a two-year delay announced in December 2022. If you’re self-employed or earn income from property, now is a good time to check whether you’ll be affected and start preparing.
Does It Apply to Me?
If you currently submit a personal tax return and earn at least £20,000 annually from self-employment or property rental, then yes — MTD is likely to apply to you.
Here’s how the rollout is structured:
- Over £50,000 turnover: April 2026.
- £30,000–£50,000 turnover: April 2027.
- £20,000–£30,000 turnover: April 2028.
Turnover refers to your total income before expenses, excluding PAYE earnings. If your income is below £20,000, you won’t be required to comply, but it’s worth monitoring. If your income increases and you miss the threshold, then penalties could apply. You may choose to opt in voluntarily to avoid future disruption or benefit from the improved reporting tools, which I outline below.
What's Changing?
Anyone within the MTD for IT scheme will need to send quarterly summaries of their business income and expenses to HMRC using compatible software. HMRC will then provide estimated tax calculations which may help you to budget for the tax due at the end of the year.
On top of this, there will be an end of year finalisation of their tax affairs (again using software) which will effectively be the current annual self-assessment tax return. You will therefore be reporting to HMRC five times a year instead of once.
Will I Incur Additional Expense?
If you complete the returns yourself, then the main additional expense will be your own time. I would also recommend using software (see below).
Asking clients to accept a price increase is something that we try to avoid, however to get an accountant to submit five pieces of work to HMRC annually rather than one is obviously a lot more work. We will be in contact with all of our clients in the year prior to the MTD for IT implementation to discuss these fees. We will endeavour to keep any increase in fees as minimal as possible.
What Software Should I Use?
While spreadsheets may still be usable, they’ll need to be linked to bridging software to meet HMRC’s requirements, which could add complexity and cost. It may therefore be worthwhile investing in accounting software as it can provide other benefits, many of which I have already written about here.
Free software may be available, but in our experience, paid options tend to be more intuitive and reliable. Many packages cost under £150 per year.
At Anderson Accounts, we recommend Xero and have a partnership that may allow us to offer discounted rates. That said, we’ll work with whatever software you choose, as long as it is compatible with the MTD system implemented by HMRC.
Additional Benefits
There could be additional benefits to complying with MTD for ITSA. Quarterly reporting encourages more regular engagement with your business finances. This can help you spot opportunities or issues earlier and make more informed decisions.
It also means your tax data will be up to date throughout the year, so finalising your return should be quicker and easier. You’ll have a clearer picture of your tax liability well before the payment deadline, giving you more time to plan.
As you will be reviewing your data more regularly, you’re less likely to forget what they relate to — saving you from last-minute invoice hunts and expense confusion.
What Should I Do Now?
The first thing is to ensure that you are not panicking about these changes. There's a lot of time to prepare .
Speak to your accountant early if you have questions or concerns. The last thing any accountant wants is clients rushing to comply with the requirements at the last minute.
If you’re not currently using accounting software, now’s a great time to explore your options. If you already use software, check that it’s on track to be MTD-compliant for ITSA. Getting set up early will make the transition much easier when the time comes.
Note: this post was updated on 31st October 2025
