What is MTD?

MTD is a key part of the government’s work to digitalise the tax system. It changes how some taxpayers maintain their accounting and tax records and how they transact and communicate with HMRC.

The project began with VAT. MTD VAT has applied to all VAT-registered businesses since April 2022. MTD will be phased in for income tax from April 2026. No date has yet been set for MTD for corporation tax. 

Who is within MTD income tax?

Initially, MTD income tax will apply to individuals who:

• carry on a trade (commonly referred to as self-employed or sole traders); and/or 

• receive income from property (landlords).

  
  

There are some exemptions, for example, individuals who are digitally excluded will not have to comply with MTD income tax. 

The initial phase of MTD income tax will not apply to other income taxpayers, such as partnerships and trusts and estates. They may be brought within MTD income tax at a later date. 

When does MTD income tax start?

The start date is determined by an individual’s total turnover/gross income. This is the combined figure from all trades and property income sources.

An individual must comply with MTD income tax:

• from 6 April 2026, where their annual turnover exceeds £50,000;

• from 6 April 2027, where their annual turnover exceeds £30,000; and

• from 6 April 2028, where their annual turnover exceeds £20,000.

  
  

The figures from the individual’s income tax return for 2024/25 will be used to determine if they must comply with MTD income tax from 6 April 2026. 

What will change?

When MTD income tax becomes mandatory, taxpayers within scope will be required to:

• maintain digital accounting records in a software product or spreadsheet. Maintaining paper records will no longer meet the legislative requirements; and

• submit quarterly updates to HMRC and finalise their tax position after the end of the tax year. The quarterly updates will need to be submitted using a functional compatible software product that can access HMRC's application program interfaces (API) platform.

  
  

This means that they will need to acquire a suitable commercial software product or appoint an agent to submit information to HMRC on their behalf.

The quarterly updates are intended to be a simple summary of transactions. A final, year-end tax return is also required, with the same deadline as the current self assessment return.

Any tax and accounting adjustments that are needed can be made in the year-end return.

Separate quarterly updates will be required for each business. For example, an individual who has one self-employment and also has a UK property business will need to submit eight quarterly updates a year.

The due dates for paying tax will not change under MTD income tax.

When are the updates due?

The quarters and deadlines for submitting updates are as follows:

• 6 April to 5 July: 7 August

• 6 July to 5 October: 7 November

• 6 October to 5 January: 7 February

• 6 January to 5 April: 7 May

  
  

Therefore, the first quarter for an individual who is within MTD income tax from 6 April 2026 is the quarter ended 5 July 2026. The return for that quarter must be submitted to HMRC by 7 August 2026.

You can elect to use calendar quarters instead (ie, 30 June, 30 September, 31 December and 31 March). In this case you will need to join from the relevant 1 April rather than 6 April.

What can I do now?

It is possible to sign up to use MTD income tax now, voluntarily. This can be done by the individual or by an agent on behalf of a client. A number of eligibility conditions apply, including that the taxpayer or agent uses software that works with MTD income tax.

MTD income tax is expected to have a significant impact on some agents. ICAEW is publishing a series of articles which are intended to help agents to prepare their clients, and their own practices for the changes.