Making Tax Digital for Income Tax Is Now Live – What You Need to Know for 2026/27

It’s been just under a month since one of the most significant changes to the UK tax system came into effect: Making Tax Digital (MTD) for Income Tax is now live.

If you’re self-employed or a landlord, now is the time to make sure you’re fully prepared.

What is Making Tax Digital for Income Tax?

From the 2026/27 tax year, MTD became mandatory for individuals with business and/or property income exceeding £50,000 per year (based on total income, not profit).

Under the new rules, you must:

• Keep digital records of your income and expenses

• Submit quarterly updates to HMRC

• Complete a final year-end declaration 
  

The first quarterly update is due by 7 August 2026.

This marks a major shift away from the traditional once-a-year tax return toward a more frequent, digital reporting system.

Important: You Still Need to File Your 2025/26 Tax Return

Even though MTD is now underway, there’s an important overlap to be aware of.

You will still need to:

• Submit your 2025/26 self-assessment tax return by 31 January 2027 

• While also completing your quarterly MTD reporting for 2026/27 
  

This dual requirement is something many taxpayers overlook - planning ahead now will help you avoid unnecessary stress later.

Are You Affected?

HMRC estimates that around 860,000 individuals have now been brought into MTD from April 2026.

If you’re one of them and haven’t yet taken action, you’re not alone - but it’s important to get started as soon as possible.

At SJC, Chartered Accountants, we’ve been supporting clients through the transition over the past month and beyond, helping them move to digital systems smoothly and stay compliant with the new requirements.

What Else Is Changing in the 2026/27 Tax Year?

Alongside MTD, several other tax changes came into effect in April 2026. Here’s a clear breakdown of what you need to know:

Income Tax Changes

While most income tax thresholds remain frozen, there’s a notable change for dividend income:

• Basic rate band (up to £37,700): increases to 10.75% (from 8.75%)

• Higher rate band (£37,701–£125,140): increases to 35.75% (from 33.75%)

• Additional rate (over £125,140): remains at 39.35% \
  

If you’re a company director or investor, this could impact how you extract income.

Corporation Tax Updates

Increased Tax on Director Loans (s455)

The tax charge on unpaid director/shareholder loans will rise to 35.75% for loans made on or after 6 April 2026.

This applies where loans are not repaid within 9 months and 1 day of the accounting period end.

Higher Penalties for Late Filing

New penalty rates for corporation tax returns (due on or after 1 April 2026):

• Missed deadline: £200 

• 3 months late: £400 

• Third consecutive failure: up to £2,000 
  

Consistent late filing is becoming increasingly costly - compliance is more important than ever.

Capital Gains Tax (CGT)

Rates for gains qualifying for:

• Business Asset Disposal Relief (BADR) 

• Investors’ Relief (IR) 

have increased to 18% from 6 April 2026 (up from 14% in 2025).

If you’re planning to sell a business or shares, timing remains an important consideration.

VAT Update

From 1 April 2026, a new VAT relief applies:

• Most donations of business goods to charities are now excluded from deemed supply VAT rules
  

This is a positive change for businesses supporting charitable causes.

How We Can Help

The 2026/27 tax year brings both new obligations and new opportunities. With MTD now live and the first deadlines approaching, taking action early is key.

At SJC, Chartered Accountants, we:

• Support your MTD transition and digital setup 

• Provide proactive, tailored tax advice 

• Help you stay compliant and avoid costly penalties
  

If you haven't yet considered discussing your move to Making Tax Digital, now is the time.

Get in touch with our team today and let’s ensure you’re fully prepared for the months ahead.