Making Tax Digital for Income Tax: What It Means for You and How to Prepare

Posted on 2 March, 2026 in Tax Advisory and Planning

From April 2026, the way many individuals report income to HMRC will change significantly.

If you earn income from self-employment or property, this is a change in how your financial information is recorded, reported, and managed throughout the year.

At DSK, we have supported clients through decades of tax change, and we are here to assist you with the change to Making Tax Digital for Income Tax (MTD for IT).

What is changing from April 2026

From 6 April 2026, individuals with gross income over £50,000 from self-employment and/or property must comply with MTD for IT.

It is important to note that this threshold is based on total income before expenses, not profit, so more people will fall within the scope than expected.

The rules will expand further:

April 2027 – threshold reduces to £30,000
April 2028 – expected to reduce to £20,000

At present, MTD for IT does not apply to:

Partnerships (including LLPs)
Companies (already covered by corporation tax rules)
Individuals below the income thresholds

What you need to do

MTD for IT introduces three key requirements:

1. Keep digital records

MTD for IT requires digital record-keeping and submission through compatible software. You must maintain digital records of both income and expenditure.

Many clients choose Xero for its usability and efficiency, though the right solution depends on your circumstances. The compatible software:

Stores your records digitally
Submits updates directly to HMRC
Provides real-time financial visibility

This replaces manual records or spreadsheets that are not linked to compliant software. If you are not currently using accounting software, this will need to be implemented immediately.

2. Submit quarterly updates

MTD introduces a structured, year-round reporting cycle. You will need to send summaries of your income and expenses to HMRC every three months using compatible software.

For those starting in April 2026, the standard deadlines are:

6 April to 5 July – due 7 August 2026
6 July to 5 October – due 7 November 2026
6 October to 5 January – due 7 February 2027
6 January to 5 April – due 7 May 2027

Each update gives HMRC an ongoing view of your income position during the year.

3. Submit a final declaration

At the end of the tax year, you will still submit a final declaration by 31 January following the tax year.

This declaration will:

Confirms your total income
Includes other sources such as dividends or interest
Finalises your tax liability

Payment deadlines remain unchanged

31 January – balancing payment and first payment on account
31 July – second payment on account

What this means in practice

MTD will introduce:

More structured reporting during the year
Greater reliance on accurate, up-to-date records
Ongoing interaction with your accountant
Improved visibility of your tax position

Impact on fees

The move from one annual submission to five submissions per year will require additional time and oversight, which includes:

Preparation and submission of quarterly updates
Ongoing review of digital records
Software support and process management
Monitoring your tax position throughout the year

We will review the impact on individuals on a case by case basis ensuring full transparency.

How we support you

At DSK, we guide clients through change with a focus on long-term value, combining compliance, tax expertise and strategic advice into one integrated service. We support you by:

Assessing whether MTD applies to you
Reviewing your current structure
Implementing the right systems and software
Managing quarterly reporting
Providing ongoing strategic tax advice

Next steps

If you are likely to be affected by MTD for IT, and you would like to discuss how MTD will affect you, we are here to help.

We can assist you with:

Confirming whether you fall within scope - either now or in the future
Reviewing structures and planning opportunities
Implementing digital systems
Putting a clear plan in place

FAQs: Making Tax Digital for Income Tax

Do I need to comply with MTD now?

If your combined gross income from self-employment and/or property exceeds £50,000, MTD for IT applies from April 2026.

If your income is below this level, you are not yet required to comply, although the threshold will reduce in future years.

How do I know if I exceed the £50,000 threshold?

The threshold is based on total income before expenses.

For example, if you receive £30,000 from rental income and £25,000 from self-employment, your combined income is £55,000, so MTD applies.

What happens if my income fluctuates?

It is your responsibility to assess whether you fall within MTD for IT.

Your income will determine whether you fall into the new regime or fall out of it – for the later you would likely return to the self-assessment tax return regime..

Do I still need to file a Self-Assessment tax return?

For those who fall into the scope of MTD for IT, the traditional self-assessment return is replaced by:

Four quarterly updates
Final declaration

The final declaration effectively completes your tax position for the year.

Will I need to pay tax four times a year?

No.

Tax payment dates remain unchanged:

31 January
31 July

MTD affects reporting only, not when tax is paid.

What records do I need to keep?

You must keep digital records of:

Income
Business expenses

These records must be maintained in MTD-compatible software.

Can I still use spreadsheets?

Spreadsheets can only be used if they are linked to MTD-compatible software that can submit data directly to HMRC.

Standalone spreadsheets will not meet the requirements.

What software should I use?

You will need MTD-compatible accounting software. Many clients choose Xero due to its ease of use, though there are other suitable options.

The right solution depends on your business and how you currently manage your records.

What happens if I miss a quarterly deadline?

Late submissions may result in penalties under HMRC’s points-based penalty system.

Staying organised and submitting on time will be important to avoid unnecessary charges.

Helpfully, for the first year of MTD for IT, there will be no late filing penalties issued for the 2026/27 quarterly returns. This relaxation of the rules does not apply to the final declaration.

Will this increase my accounting fees?

MTD involves more frequent submissions and ongoing support throughout the year.

This typically leads to an increase in professional fees, reflecting the additional work involved. We will always discuss this with you in advance.

Does MTD apply to partnerships or companies?

Currently:

Partnerships are not within MTD for IT
Companies are not affected by these rules

This may change in the future as HMRC continues to expand the regime.

Can I plan around MTD?

Yes. There are planning opportunities depending on your circumstances and these can be discussed on a case by case basis to ensure they are appropriate for your circumstances.

What should I be doing now that MTD is live?

If you are within scope, you should already be:

Registered for MTD for IT
Using MTD-compatible software
Keeping digital records
Preparing for quarterly submissions

If you have not yet taken these steps, it is important to act quickly to avoid disruption.

How can DSK help?

We support clients with:

Registering with MTD for IT
Setting up and implementing software
Managing quarterly submissions
Reviewing records and ensuring compliance
Providing ongoing tax advice and planning

We aim to make the process straightforward and ensure you stay fully compliant while maintaining clarity over your tax position.