Making Tax Digital for Income Tax
What is MTD for Income Tax?
Making Tax Digital for Income Tax is new HMRC legislation that comes into effect in April 2026 for Sole Traders and Landlords, and it will change the way you manage your business finances. It is mandatory for all qualifying businesses and will carry penalties for those that don’t comply.
When does it come into effect?
It is being phased in over the next few years based on the qualifying annual income of your business, as follows:
Income over £50k – 6 April 2026
Income over £30k – 6 April 2027
Income over £20k – date tbc
What is required?
The introduction of MTD for IT requires that all qualifying businesses submit quarterly profit & loss updates to HMRC, as well as a Final Declaration. These must be submitted via approved digital software, and are in addition to your annual Self Assessment submission. If you don’t already use digital software for your bookkeeping needs this is the perfect opportunity to migrate your records and begin this journey.
What are the benefits?
By submitting quarterly returns to HMRC you will need to be in a position where your books are kept up to date. This in turn will mean that you have a much clearer, ongoing picture of the health and growth of your business and saves that last minute, costly search for receipts at the end of the year!
You will see an instant quarterly estimation of your annual tax liability in relation to your business, allowing for better and more accurate financial planning.
Digital accounting software offers considerable benefits over manual and traditional bookkeeping methods. These software packages are designed to simplify data entry, automate bank reconciliation, capture receipts digitally, and streamline invoicing process, among many other benefits. MTD compatibility is a key new development for all the main software providers who aim to make it as simple and streamlined as possible.
Most providers offer a range of packages to suit every business and many now include effective but simple analytics tools so you really understand the health and profitability of your business.
How can Elmden help?
At Elmden we will fully support your transition to this new way of working. We are across the latest compliance requirements and understand the software you need to make these changes. We will:
Learn More
To find out more about MTD for Income Tax and to check whether you qualify, click below.