The way that some self-employed taxpayers report their business profits to HMRC is set to change under the Making Tax Digital (MTD) for business regime, when it begins to apply to Income Tax reporting.

This is a freeview 'At a glance' guide for the many self-employed taxpayers, company owners and property landlords who are unaware of HMRC's radical plans to transform the tax online filing system. 

At a glance

Summary of Making Tax Digital (MTD) for Income Tax. 

  • From April 2026, MTD for Income Tax will start to become mandatory for self-employed businesses and landlords, see Making Tax Digital: Index & timeline.
  • Under MTD for Income Tax, the Self Assessment tax return will be replaced by five new reporting obligations made during and after the tax year. There will be quarterly updates required and a year-end final declaration.
  • Non-UK resident or domiciled individuals will have to follow MTD where they have UK self-employment and/or UK property and meet the turnover threshold.
  • UK residents will have to follow MTD if they have foreign property income that meets the threshold (may be combined with other self-employment or UK property turnovers). 
  • Digital records of all transactions will be needed. These will form the basis of the quarterly updates, which must include the information set out in HMRC's Update notice.
  • If you are not already using software for your record-keeping/accounting, you will need to learn how to use a spreadsheet or some type of accounting software or App which is MTD compliant.
  • You will need a reliable internet connection and a facility to store your electronic data.

MTD for Income Tax reporting requirements 

  • Quarterly updates must be submitted to HMRC, with everyone adhering to the following quarter dates:
Quarter  Period Deadline
 1  6 April - 5 July   7th August
 2  6 April - 5 October  7th November
 3  6 April - 5 January  7th February
 4  6 April - 5 April  7th May
  • An election (a calendar quatres election) can be made to change to calendar quarters, which will stay in place until withdrawn. The filing deadlines will remain the same.
  • A year end final declaration statement must be then made for the relevant period to finalise your income tax position. The information provided will then be used to generate your Self-Assessment tax bill for that tax year. This must be filed by 31 January following the relevant tax year unless later under s8 or s8A TMA 1970.

Tax payments

  • The tax liability will need to be paid by 31 January of the next year (as is currently the case).
  • You will be allowed to voluntarily pay your taxes as you go: the detail is still being decided.
  • Eventually, it is possible that you will be required to make four payments per year on account of tax.

Penalties

  • From April 2024, Volunteers participating in the testing phase of Making Tax Digital for Income Tax, will be subject to the new Late filing and Late payment penalties. 
  • The regime will also apply:  
    • From April 2026, for taxpayers with business or property income over £50,000 per year (who are required to submit digital quarterly updates through MTD for Income Tax). 
    • From April 2027, for those with business or property income over £30,000. 
  • These new penalty regimes use a point-based system for late submission and the late payment of tax liabilities.
  • Penalties already apply for errors in returns or documents and for late payment interest.
  • There will be no late submission penalties for missing quarterly updates during the testing phase of MTD for Income Tax.
  • See Penalties: Making Tax Digital

Exemptions 

The digitally excluded exemption 

  • If you are reading this guide you are probably online and this might not apply.
  • The digitally excluded are exempted from MTD if they have notified HMRC (to opt out) and either: 
    • the person or partner is a practising member of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records, or 
    • for any reason (including age, disability or location) it is not reasonably practicable for the person or partner to use electronic communications or to keep electronic records.

Income exemption 

  • An individual will be exempt from MTD for Income Tax if: 
    • The digital requirements applied to a person for the prior 3 tax years, and
    • The person's qualifying income for each of those three tax years was less than £30,000. 

No National Insurance Number exemption

  • An individual will be exempt from MTD for Income Tax if on 31 January before the start of the tax year, that person does not have a National Insurance Number. 

Qualifying care exemption 

  • MTD for Income Tax will not apply to a person in respect of that person's provision for qualifying care.
  • Qualifying care includes foster care and shared lives care

Useful guides on this topic

Making Tax Digital: Index & timeline
When does Making Tax Digital (MTD) apply? What does Making Tax Digital really mean? How will it affect you? Does MTD mean quarterly reporting? Is my business exempted from Making Tax Digital?

Compare software for Making Tax Digital for Income Tax
What's the cheapest software I can use for Making Tax Digital for Income Tax? What is the best value software that I can use?

MTD: Toolkit for accountants
What is the current timetable for Making Tax Digital? How will it work? Which clients will be excluded? What planning needs to be undertaken?  

Making Tax Digital: Survival guide (for the self-employed & landlords)
This is a freeview factsheet for the many self-employed taxpayers, company owners and property landlords who are unaware of HM Revenue and Custom's radical plans to transform the tax online filing system. 

MTD: Income Tax Pilot Tool
Making Tax Digital (MTD) for Income Tax. Are you eligible to take part in the MTD Pilot?

Making Tax Digital: Pricing for Accountants
How much can you charge? How much should you charge?

VAT thresholds
Certain thresholds must be reached for either the registration or deregistration of VAT.


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