top of page
Search

How MTD for Income Tax will affect small businesses

Updated: Jun 5

Starting April 2026, Making Tax Digital (MTD) for Income Tax will significantly impact self-employed businesses and landlords.


Your MTD start date depends on your total combined turnover (trading turnover + rental receipts (if any) per this table.


The new rules essentially mandate digital record-keeping so that all businesses can send quarterly updates to HMRC.


If you're a sole-trader, partnership or landlord keeping paper-only or spreadsheet records, then - to put it simply - you'll need to switch to digital (online cloud) bookkeeping.

HMRC Making Tax Digital

For our top recommended bookkeeping apps, see our advice page: Bookkeeping Software & How-To



Making Tax Digital (MTD) for Income Tax - The Details


The following is what we know so far per HMRC's Guidance.


  • MTD for VAT-registered businesses was first introduced in April 2019 (if you're VAT registered, you'll already be using compliant software, but you may be required to make additional electronic reports to HMRC)

  • Turnover test - MTD applies to businesses with a turnover above £30,000, including income from all businesses and property. So, a person with £15,100 of trading income and £15,000 of rental income will be required to report under MTD as their total turnover exceeds £30,000. Businesses with a turnover exceeding £50,000 will be asked to join MTD from April 2026 after which the threshold of £30,000 will apply from April 2027.

  • The £30,000 threshold applies to individuals. So, if you rent property jointly (splitting the income 50/50), you may not need to comply with MTD until your joint rental income exceeds £60,000.


  • HMRC guidance on working out an individual’s qualifying income is at:

    Work out your qualifying income for Making Tax Digital for Income Tax – GOV.UK


  • HMRC’s online tool to check if an individual is within MTD is at:

    Find out if and when you need to use Making Tax Digital for Income Tax – GOV.UK

  • Deferrals / exemptions - there are very few. Most sole-traders and landlords must be compliant from April 2026, Partnerships from April 2027. Partnerships with a corporate partner and LLP's will have a deferred sign-up date, and entities such as Trusts, Estates of deceased persons, Trustees of pension schemes and non-resident companies look likely to be exempt.

  • Penalties - When a filing deadline for quarterly updates and year end submissions is missed, a point is received. A £200 penalty is issued on reaching a set threshold, any other late filings will trigger a further £200 penalty. The penalty position is reset following a set period of compliance.

  • What info will be submitted to HMRC? - Total sales and totals of expenses by category. Year-end accounting and tax adjustments will be made via a final submission for the year known as the end-of-period statement (EOPS).

  • When will submissions be required? - The quarterly filing deadlines will be: 5 August, 5 November, 5 February, and 5 May (i.e. 5 May deadline for the final quarter ending 31 March - 5 April each year)

  • How will the tax position be finalised? - The EOPS will have to be submitted by 31 January following the end of the tax year, somewhat similar to the current requirement to submit a Self-Assessment Tax Return.


  • Payment of tax - The existing SA due dates and payment options do not change under MTD.


⚠️ Prepare now


Act now to make the transition to MTD as easy as possible:



A BRIEF HISTORY OF MTD FOR INCOME TAX SELF-ASSESSMENT (MTD for ITSA)



Would you like help to pay less tax? Feel free to get in touch or check out our related posts 👇

Comments

Commenting on this post isn't available anymore. Contact the site owner for more info.

© 2021 MasseyAccountingCompany created with Wix.com

bottom of page