After a few delays it looks like Income Tax will be brought into HMRC’s regime for submitting information digitally and that Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) will finally go ahead from April 2026 If you are affected, you will need to submit information on your income and expenses quarterly. These quarterly submissions will need to be filed by the 7th of the month following the quarter end. For example, the Q1 reporting period would run from 6 April to 5 July, and the quarterly submission would be due by 7 August. You will then need to file an annual declaration for the year, which will be similar to the current Self Assessment Tax Return, with the same 31 January filing deadline.
So who will be affected, and what can you do now to prepare?
Who is affected?
Those with qualifying income (total gross income/turnover from Foreign and/or UK rental property and/or self-employed income – see below) of £50,000 or more on their 2024/25 Self Assessment Tax Return, will be mandated to join MTD for ITSA from April 2026. If the income reported on your 2023/24 Tax Return indicated that you were likely to be in that bracket, then HMRC should already have written to you to explain that you may be affected.
This threshold falls to £30,000 from April 2027, and to £20,000 from April 2028, bringing even more taxpayers into the regime.
Qualifying income
HMRC defines qualifying income as the total gross combined trading and property income that you get in a tax year (6 April to 5 April) before deducting any expenses. This means that if you have income from more than one of these sources, such as income from a property and from self-employment, then you will need to add together the income from both sources to see if the total exceeds £50,000. Any other income you might receive, such as employment income, interest or dividends, is not counted towards your qualifying income.
If your income is not for a full 12 months (for example, if you have only been renting out a property for 6 months) then HMRC will annualise the income by pro rating it to calculate your rental income for 12 months. This will be your qualifying income.
Income from jointly owned property
If you receive income from a property that is jointly owned by you and someone else, then it is only your share of the total property income that is counted towards your qualifying income. For example, if you jointly own a property that generated property income of £108,000 during the tax year, and you received 50% of the rental income, then your qualifying income from that source would be £54,000 and you would therefore need to sign up to MTD ITSA by April 2026.
Disguised investment management fees and income based carried interest
These types of income form part of your qualifying income as they are treated as profits of a deemed trade.
Income from a partnership
If you receive income from a partnership, this will not form part of your qualifying income, unless you receive disguised investment management fees or income based carried interest as mentioned above. Partnerships themselves will need to start reporting under the MTD ITSA requirements but the date this is planned to come into effect is not yet confirmed.
Income from trusts
If you are a beneficiary of a bare trust, any property income or trading income that you are entitled to will count towards your qualifying income. Similarly, if you are a beneficiary of an interest in possession trust, then any property or trading income that is paid directly to you and bypasses the trustees will count towards your qualifying income.
Who’s out?
HMRC has specifically outlined that individuals who fall within one of the following categories cannot yet sign up for MTD for ITSA:
- Trustees, including charitable trustees or trustees of non-registered pension schemes
- Persons without a National Insurance number – this only applies for a tax year where you do not have a National Insurance number on 31 January before the start of the tax year
- Personal representatives of deceased persons
- Lloyd’s members, in relation to their underwriting business
- Non-resident companies.
You can apply for an exemption from using MTD for ITSA if you consider yourself to be ‘digitally excluded’ and one of the following apply to you:
- It’s not practical for you to use software to keep digital records or submit them — this may be due to your age, disability, location or another reason
- You are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records.
It is not possible to apply for exemption until the system is live, and so it is not yet known what proof will be required, to demonstrate digital exclusion.
What can I do now?
HMRC has confirmed that as a taxpayer registering for MTD you will need a Government Gateway account and must be registered for SelfAssessment. If you don’t have a Government Gateway account, such as a personal tax account, you should consider setting this up now. Make sure, too, that you are registered for Self-Assessment.
Creating a Government Gateway account
The setting up process asks you to provide an email address and create a password. https://www.access.service.gov.uk/registration/email
You will also need to prove your identity. This is done digitally by providing your National Insurance number and two of the following:
- A valid UK passport
- A UK driving licence issued by the DVLA (or DVA in Northern Ireland)
- A payslip from the last three months or a P60 from your employer for the last tax year
- Details of a tax credit claim, if you made one
- Details from a Self-Assessment tax return, if you made one
- Information held on your credit records, if applicable (such as loans, credit cards or mortgages)
Registering for Self-Assessment
If you are self-employed and earned more than £1,000 (before subtracting anything on which you can claim tax relief) or made more than £2,500 profit in a tax year from renting out property, you need to complete a Self Assessment tax return.
If your income from any untaxed sources, such as property rental, is between £1,000 and £2,500 you may not need to do a tax return and instead can notify HMRC through your personal tax account or call HMRC.
If you haven’t submitted a Self Assessment tax return before, you have until 5 October after the end of the tax year to notify HMRC that you have an obligation to file one for that tax year. HMRC has an online service to check if this applies to you.
What happens next?
You must submit your Self Assessment tax return for 2024/25 online by 31 January 2026. HMRC will review it and check if your qualifying income is more than £50,000. If it is, HMRC will write to you and confirm that you are mandated to comply with MTD for ITSA requirements from 6 April 2026. If you have an agent, they can meet the requirements on your behalf.
You, or your agent, will need to have access to software that enables you to submit your information digitally. There are a number of software options on the market, which we are currently reviewing.
If you become self-employed or a landlord after 6 April 2025 you do not meet the MTD for ITSA requirements until you’ve submitted your first tax return reporting such income. HMRC will notify you once your qualifying income is more than the threshold and tell you when you must start meeting the requirements.
You’ll have the option to voluntarily sign up for the system at an earlier date. HMRC is currently running pilots of the scheme. If you are interested in joining a pilot, or have any queries, please contact us.
