Making Tax Digital: A New Era of Tax Reporting
Making Tax Digital (MTD) for Income Tax is now in force, bringing significant changes to how landlords and self-employed individuals report their income to HMRC. After years of consultation and delays, the regime became mandatory from 6 April 2026 for taxpayers with qualifying income above £50,000.
The new system replaces the traditional approach of submitting a single annual Self-Assessment Tax Return. Instead, affected individuals must keep digital records and submit quarterly updates to HMRC using compatible software. A year-end Tax Return remains necessary to confirm taxable income, claim reliefs and make adjustments. Quarterly updates do not trigger tax payments but are now a mandatory part of the compliance process.
Who is affected?
MTD applies to individuals with qualifying income from self-employment, property income, or a combination of both. The rules are being introduced in stages.
From 6 April 2026, individuals with qualifying income exceeding £50,000, based on their 2025 Self-Assessment Tax Return, fall within the regime. The threshold reduces to £30,000 from 6 April 2027 and £20,000 from 6 April 2028.
The income test combines all relevant sources. For example, an individual with £30,000 of self-employed income and £25,000 of rental income has qualifying income of £55,000 and falls within the regime from April 2026.
Quarterly reporting requirements
The first MTD reporting period ran from 6 April to 5 July 2026, with the submission deadline on 7 August 2026.
The remaining quarterly deadlines for 2026/27 are:
• 7 November 2026 (quarter ending 5 October 2026)
• 7 February 2027 (quarter ending 5 January 2027)
• 7 May 2027 (quarter ending 5 April 2027)
A Tax Return must still be submitted after the tax year to include all other income and capital gains. For 2026/27, this will be due by 31 January 2028, alongside any balancing tax payment and the first payment on account for 2027/28.
Taxpayers therefore face additional reporting requirements although for now the tax payment timetable remains unchanged.
Missed the first deadline?
MTD has also introduced a new penalty regime. However, HMRC has confirmed that no penalties will apply for missed quarterly update deadlines during 2026/27, recognising that taxpayers are adjusting to the new system.
From 2027/28 onwards, late submissions will be subject to a points-based penalty system. Taxpayers receive one penalty point for each missed quarterly update or Tax Return deadline. Once four points have been accumulated, an automatic £200 penalty applies, with further £200 penalties applying for subsequent failures to meet filing obligations.
Are exemptions available?
HMRC recognises that digital compliance may not be practical for everyone. Taxpayers can apply for an exemption where it would be unreasonable to expect them to maintain digital records or submit information electronically.
Automatic exemptions apply to trustees, partnerships, personal representatives of deceased individuals and some taxpayers who lack capacity.
Some taxpayers with trust or estate income and individuals who usually complete the residence pages of their Tax Returns have been granted temporary exemptions until at least 2027/28.
What happens next?
MTD represents more than a reporting change; it requires a shift to regular digital record keeping and more frequent interaction with HMRC. Individuals who previously prepared records annually must now report quarterly.
With further submissions due throughout the tax year, taxpayers within scope should ensure their systems and processes are fit for purpose. Advisers also have an important role in helping clients adapt. Anyone affected should speak to their accountant or tax adviser to ensure they remain compliant.
If you have any questions, please contact Nicole Johnston, Senior Tax Manager.