Making Tax digital (MTD) for income tax is being phased in from April 2026.

MTD for Income Tax will apply from April 2026 to those who receive income from self-employment and/or property where turnover/gross income from these sources combined is above a threshold of £50,000. Those with turnover from these sources combined above a threshold of £30,000 are mandated to join MTD for Income Tax from April 2027. Those with turnover from these sources combined above a threshold of £20,000 will be mandated to join MTD for Income Tax from April 2028.

The current regulations do not cover partnerships; MTD for Income Tax is expected to be extended to partnerships in the future, but no date has been announced.

When MTD for Income Tax becomes mandatory, taxpayers within scope will be required to:

• maintain digital accounting records in a software product or spreadsheet. Maintaining paper records will no longer meet the legislative requirements; and
• submit quarterly updates to HMRC within just over a month of the end of the quarter and a year-end tax return after the end of the tax year. The submissions must be made using a functional compatible software product such as Xero or QuickBooks that can access HMRC's application program interfaces (API) platform.

Taxpayers within scope will need to acquire a suitable commercial software product or appoint an agent to submit information to HMRC on their behalf. HMRC's paper and online self assessment (SA) tax return will remain available only to taxpayers outside the scope of MTD for Income Tax. For those outside MTD for Income Tax, the SA tax return is likely to be replaced with a new (but similar) system in due course.

MTD for Income Tax will not change:

• the underlying income tax rules (other than in relation to record keeping);
• the amount of detail submitted to HMRC which remains the same as the current SA tax return (although more detailed records will need to be kept and updates will need to be submitted quarterly); or
• the current filing and payment deadlines for income tax.

Who is in?

MTD for Income Tax requirements will apply as set out above.

The registration threshold will be applied to the total turnover/gross income from all sources of self-employment and income from property. It will be applied against specific boxes on the SA return.

MTD for Income Tax requirements will not apply to a number of entities including partnerships and trusts.

When does it start?

The first phase of MTD for Income Tax starts on 6 April 2026. The first quarterly updates, for the quarter 6 April to 5 July 2026, will be due on 7 August 2026. The first final declaration for the tax year 2026/27, will be due on 31 January 2028.

What to do next?

These changes are without doubt going to significantly change the way businesses are run and report to HMRC.  To manage this transition we have put together a team of expert advisors who can guide on the whole process.  And as a firm we are putting in place additional resources to be able to provide ongoing support.

We would strongly recommend an initial (and free) review with one of our team.  They will go through how the changes may affect you and what the various options are.

Please call any of our offices on the numbers below, or email on mail@renniewelch.co.uk.

We look forward to being able to support you on this digital journey!

If you would like more information, please telephone Kelso 01573 224391 or Berwick on 01289 330311