Making Tax Digital for Income Tax

1 Apr

Being implemented by HMRC from April 2026 is Making Tax Digital for Income Tax (MTDIT) for those with income in excess of £50,000.

Who does this effect and are you prepared for the change over?

Those who are either sole traders or landlords with turnover in excess of £50,000. It’s important to ensure that you’re aware that it relates to turnover (Income) rather than the level of profit/monies that you withdraw from the business.

An example being;

Person X:

Properties owned:

Rents charged in the period between 6th April 2024 - 5th April 2025;

Prop 1 - £20,000 charged annually to tenant;

Prop 2 - £15,000 charged annually to tenant;

Prop 3 - £17,000 charged annually to tenant.

Total income being £52,000 and therefore having to be registered for MTDIT as total income in the year is in excess of £50,000.

What’s the impact on you and what you need to complete?

HMRC require that you are registed for MTDIT from 1st April 2026, that your records are maintained in a digital format so that they can be submitted to HMRC on a quarterly basis.

You’ll therefore need to ensure that you are maintaining your records on a more regular basis and unfortunately, if you don’t already, you will need to use a compatible accounting software in order to submit with HMRC as they’re not offering a free software themselves. You’ll need to therefore sign up to an accounting software such as Xero, Sage or Quickbooks. There are other providers but we mainly look to utilise Xero due to it’s user friendly interface and our familiarity with the software.

If you’re looking to use Xero, then they typically have introduction offers on their website and the package that you’re likely to use is the simple subscription as this allows for entries onto the system and for submissions for MTDIT.

I’m still not sure if I need to be registered for MTDIT, can you help?

Yes, we can look to help and do feel free to get in touch if you want clarity on your position. We have highlighted below those who are likely to fall within MTDIT for 2026/27 tax period (Note - the threshold drops to £30,000 for 2027/28;

Self-employed tradesmen/women;
Landlords of multiple properties or commercial properties;
Traders of stock and items on marketplaces as a full-time occupation;
Entertainers.

What are the impacts moving forward? I don’t have income above £50,000 but I want to be prepared?

It’s great that you’re looking to get ahead and ensure that you’re prepared as there are a large amount of changes ahead. The associated threshold when people fall within MTDIT drops for the next couple of years following from 2026/27 as shown below;

Year: Income threshold:
2027/28 - £30,000;
2028/29 - £20,000.

The process with HMRC is that you don’t immediately have to comply with MTDIT as soon as your income exceeds the above thresholds, there is a lagging effect of one year to when you need to be registered. We’ve provided an example below to show how this will effect you;

Income for 2026/27 of £45,000:

You would fall within having to comply with MTDIT with HMRC for the period commencing 1st April 2028 onwards. This has been implemented by HMRC this way in order to give taxpayers a period of time in order to get compliant with the MTDIT regime and to reduce the reactive nature when it comes to setting up processes and accounting software.

OK, I’ve heard enough, how much is this likely to cost me?

We look to ensure that our fees and services are known in advance. Below, we show a typical fee for MTDIT services provided, however if you have a high amount of transactions or complications then this is subject to change which we would ensure is covered from our initial discussion.

Quarterly submission/review on Xero - £50 per submission;
End of period submission - £150 per annum.
Bookkeeping services - If you don’t want to complete the entries within Xero yourself, we can look to complete this for you, at a charge typically between £30 - £60 a month in addition to the above submission charges.

Therefore, if you complete the entries yourself within Xero, we can look to complete the submissions for you at a total price of £300 plus VAT a year, whilst this service along with bookkeeping will typically range between £660 - £1,020 plus VAT a year. We bill these fees on a monthly basis, in order to reduce the impact of a lump sum being required at short notice.