Making Tax Digital for Income Tax

Making Tax Digital (MTD) for Income Tax is one of the most significant changes to the UK tax system in recent years. While the timetable has shifted several times, the government confirmed further details at the 2025 Budget, giving taxpayers and advisers greater clarity on what lies ahead.

Below, we summarise the key points and what they mean for individuals who currently complete a Self Assessment tax return.

When Will Making Tax Digital for Income Tax Apply?

MTD for Income Tax will become mandatory from 6 April 2026 for a large group of Self Assessment taxpayers, with further groups being brought into the regime in April 2027 and April 2028.

Under MTD, affected taxpayers will need to:

• Keep digital accounting records, and

• Submit quarterly updates to HMRC using MTD-compatible software, followed by an annual final declaration.
  

No Late Filing Penalties for Quarterly Updates in 2026/27

There is some welcome news for those who will be mandated into MTD in the first year.

The government has confirmed that late filing penalties will not be issued for quarterly updates during the 2026/27 tax year. This provides a valuable “soft-landing” period to allow taxpayers time to adjust to the new reporting requirements.

However, it is important to note:

• This easement does not apply to the annual tax return for 2026/27

• The final return must still be filed by 31 January 2028

• All quarterly updates must be submitted before the annual return can be completed
  

In practice, this means that although penalties may not apply to late quarterly submissions in the first year, the updates are still mandatory and cannot be ignored.

Further Deferrals Confirmed Until April 2027

Prior to the 2025 Budget, HMRC had already confirmed that individuals who report income on the SA109 Self Assessment pages (for example, those using the residence or remittance basis) would not be required to join MTD for Income Tax until April 2027.

This deferral was extended further in the 2025 budget to additional groups of taxpayers, including:

• Recipients of trust and estate income

• Individuals who use averaging adjustments, such as farmers and creative artists

• Recipients of qualifying care income

• Non-UK resident foreign entertainers or sportspeople
  

In addition, taxpayers who are under deputyship will be fully exempt from MTD for Income Tax.

What Should Taxpayers Do Now?

Although April 2026 may feel some way off, preparation is key. Many taxpayers will need to:

• Review how their records are currently kept

• Consider suitable MTD-compatible software

• Understand how quarterly reporting will work in practice
  

Taking steps early can help avoid unnecessary stress and disruption when the new rules come into force.

How We Can Help

At SJC, Chartered Accountants, we are closely monitoring developments around Making Tax Digital and supporting our clients through the transition. Whether you are likely to be mandated in 2026 or deferred until a later year, we can help you understand your obligations and put the right systems in place.

If you have any questions about how MTD for Income Tax will affect you, please get in touch with our team for tailored advice.