Making Tax Digital for Income Tax: The Basics

HMRC's Making Tax Digital (MTD) initiative continues to reshape how individuals manage and report their tax affairs. From 6 April 2026, MTD for Income Tax Self-Assessment (MTD ITSA) will apply to sole traders and landlords with annual business or property income over £50,000. This threshold reduces to £30,000 from April 2027, with a further drop to £20,000 in April 2028.

MTD ITSA requires affected taxpayers to maintain digital records using HMRC-compatible software (such as Intuit QuickBooks, Sage or Xero) and to submit quarterly updates summarising income and expenses. A final digital declaration must be submitted annually to finalise tax liabilities, replacing the traditional Self-Assessment return. Importantly, while filing processes change, the deadlines for tax payments remain the same.

Exemptions apply for those digitally excluded, such as individuals for whom the use of computers is limited due to age, disability, location or religious beliefs. Furthermore, in the recent Spring Statement it was announced that exclusions could be applied to ministers of religion, Lloyd's Underwriters and individuals who claim Married Couples' Allowance or Blind Person's Allowance, whilst the following groups of people may also apply for an exemption: Individuals who have a Power of Attorney, non-UK resident foreign entertainers and sportspeople who do not have another business that would be subject to MTD and individuals for whom HMRC cannot provide a digital service.

Anderson Barrowcliff will update its clients as new information becomes available from HMRC.