Making Tax Digital - April 2026 LAUNCH DATE

The Who What Where Why When of Making Tax Digital

✅ WHO does it affect?

• Sole traders. This is any individual who runs their own business, whatever that business may be, builders, childminders etc If you work for yourself and are not a director of your limited company, then this means you.

• Landlords. If you own a property and receive rental income then this is you. Note furnished holiday let rules were abolished in April 2025. This DOES NOT include income covered by 100% rent a room relief.

• Gross income – This means your gross sales / turnover / rent BEFORE deduction of any expenses.

• Your gross income from both MTD sources, Sole traders and landlord income will be COMBINED to calculate your total income from MTD sources to determine when you will need to comply.

• The first group of taxpayers will have gross income from these sources of over £50,000. Those taxpayers must comply by April 2026.

• From April 2027, it will apply to those earning over £30,000

• From April 2028, it will apply to those earning over £20,000

• It is YOU as the individual not your income sources that are mandated.

• Examples:

• If your turnover from self employment was for example £45,000 and you had rental income of £8,000 your combined income from Making Tax Digital sources is £53,000 and over the threshold therefore you would have to comply from April 2026.

• With the above scenario if your rental property is owned jointly then your portion of the rental income would be £4000 combined with the £45000 turnover from self employment you would be UNDER the £50,000 limit and not need to comply until April 2027.

• If your turnover was £45,000 from self employment and you had no other income or your other income was from investments then you would not have to comply yet.

 📌 Not affected (yet):

• Partnerships-The complexities of sharing partnership income means HMRC are not yet ready to process this income stream, however it is their intention to include it in the future.

Will HMRC contact me?

• Yes, HMRC have already written to taxpayers saying they “might” be mandated from April 2026. This is based on the information submitted in their 2024 tax returns, if your turnover was £45,000 or above.

• HMRC will use your prior year tax return to determine when you will be affected. We are currently in the 2025-26 tax year. HMRC will be using the information from 2024-5 tax return submissions which are due by 31st January 2026 to determine who will be impacted from April 2026 which is the 2026-27 tax year.

Are there any exemptions?

• There WILL be exemptions, however they are very limited. If you are digitally exempt from VAT then the same will apply to MTD.

• If it is not reasonably practical. Eg you don’t use email or online banking.

• Religious reasons

• You can apply for digitally excluded status, but not until you have been mandated. You will be exempt as soon as you apply and until HMRC contact you if they do not accept.

Some trades are currently exempt:

• Charities

• Trusts and Estates

• Foreign business activities of non doms

• Income from Foster care

• Lloyds Underwriters

What if my income changes?

• New sources of income will take 3 years to be included.

• A new trade starts in 2025-26, that tax return isn’t submitted until 31st January 2027, the 2026-27 tax year is already nearly complete by then so the source of income will be mandated from the 2027-28 tax year.

• It takes 3 years for the income to be mandated, but that doesn’t mean you can’t include it sooner. Get into good habits as early as possible with record keeping. Voluntary submissions are allowed.

• If it takes 3 years to come in, it also takes 3 years to leave. A drop in turnover is unlikely to be a reason to leave MTD as the income thresholds reduce to take in more taxpayers. The only real reason to leave would be the cessation of that income.

📘 WHAT is MTD for ITSA?

MTD for ITSA is a government initiative by HMRC requiring certain taxpayers to digitally keep records and submit updates on their income and expenses quarterly, instead of once a year.

You’ll need:

• Digital bookkeeping software. Many of you will have heard of Quickbooks and Xero but there are other options available and HMRC have published a list of all software solutions on their website. They will not recommend one over another. This is just a list of software solutions they know will work for MTD come April.

• There will be NO submission directly on HMRCs website.

• You will be required to make 4 submissions throughout the tax year for EACH income source. These quarters will be the same for EVERYONE. Your submissions will include your income and expenses for that quarter.

• On your first submission you can opt to have your records kept to the end of the month rather than the 5th of the month which is HMRCs current end date. During the original trials HMRC discovered the majority of taxpayers used 31st March as their year end and not 5th April, they have therefore changed their minds to allow calendar quarter submissions. Those under CIS MUST use 5th April otherwise CIS reports will not agree with your submissions.

• Once submitted HMRC will provide you with an estimate of your tax due based on that quarter. Currently this is believed to come from HMRC direct and not the software but this is still a work in progress.

 The 4 quarters are:

• 6th April to 5th July (or 1st April to 30th June) with a submission deadline of 7th August

• 6th July to 5th October (or 1st July to 30th September) with a submission deadline of 7th November

• 6th October to 5th January (or 1st October to 31st December) with a submission deadline of 7th February

• 6th January to 5th April (or 1st January to 31st March) with a submission deadline of 7th May

• A final end-of-year statement (similar to a tax return) will be made to pull your MTD submissions together to make any adjustments and add in other income sources. This will still be due by 31st January as with the standard tax return deadline.

• If you have more than one income source which falls into MTD for example self employment and 2 rental properties, then that equates to THREE MTD submissions each quarter.

💡 WHY is it happening?

• To reduce errors in tax reporting

• To modernise the tax system

• To encourage more timely and accurate record-keeping

• To give taxpayers a clearer picture of their tax position throughout the year

• HMRCs current computer system was built in 1978! It can handle 16 tax returns per second. It was time for updates and a big change to a modern faster system that integrates better.

🌐 WHERE does it apply?

• United Kingdom – applies to anyone within the UK tax system who falls under Self Assessment and meets the income thresholds.

 Tame The Taxman will have 3 pricing packages for Making Tax Digital

Bronze, Silver and Gold. Prices TBC - Please contact us for more information