When Making Tax Digital is being introduced?
MTD for IT is being introduced in various phases. Those with qualifying income of £50,000 or more on their 2024/25 Self-Assessment tax return will be mandated to join MTD for IT from April 2026. The threshold then falls to £30,000 with mandation from April 2027, and £20,000 from April 2028 (see table below).
What it means for you
If you are mandated to comply with MTD for IT, you will be required to:
- Keep digital records of your income and expenditure
- Submit quarterly updates to HMRC using MTD-compatible software
- Make any adjustments and file a Final Declaration to confirm your tax position each tax year.
HMRC have started writing to affected taxpayers from November 2025, following receipt of their 2024/25 tax return, informing them that they will need to use MTD for IT.
How we can help
If you are required to comply with MTD, then the team at PKF are here to help. We will tailor our MTD Service to meet your needs, whether that be keeping records on your behalf, submitting your digital records quarterly, or dealing with the annual declaration.
Detailed income can be found in our insights below.
This marks a significant shift from the traditional Self-Assessment process.
It’s important to determine what level of service you will need in the future and choose software accordingly. For example, not all software may be able to deal with your final declaration, but if your accountant can prepare this for you that might not be a concern.
HMRC have provided guidance to help you choose software should you wish to keep your digital records, or file quarterly submissions, yourself. You can access further details here. HMRC will continue to update the list of software suppliers as more are approved.
Our services options are detailed below
Annual declaration only
Bookkeeping method
- MTD compliant software used by client
Quarterly submission
- Client submits – we have no input or review of the quarterly submissions
Annual declaration
Our role
- We will only prepare year end adjustments to MTD & reporting of non MTD income and gains, as required for the annual declaration
Requirements
- We can prepare your annual declaration providing you have filed all four quarters MTD returns
Bridging service
Bookkeeping method
- Excel spreadsheets prepared by client
Quarterly submission
- We prepare and submit the MTD return based on your data
Annual declaration
Our role
- We prepare and submit your quarterly submissions; we then deal with your annual declaration including year end adjustments and reporting of non MTD income and gains
Requirements
- You need to prepare a spreadsheet each quarter reporting your income and expenses, and provide this to us within the specified timeframe
Hybrid support
Bookkeeping method
- MTD compliant bookkeeping software used by client
Quarterly submission
- We link to the data in your software, then prepare and submit this as an MTD return
Annual submission
Our role
- We prepare and submit your quarterly submissions; we then deal with your annual declaration including year end adjustments and reporting of non MTD income and gains
Requirements
- You need to use MTD compatible bookkeeping software, and you must process all transactions within the software for the quarter by the specified timeframe, to enable us to access this
Full support
Bookkeeping method
- We keep income and expenditure records on your behalf, using MTD compliant software
Quarterly submission
- We prepare and submit the MTD return using the data we have processed
Annual submission
Our role
- We will deal with all processes relating to MTD for you
Requirements
- You need to provide your information to us within the specified timeframe so that we can comply with your MTD obligations within the MTD deadlines
What if I realise I have made an error in a previous quarterly submission?
The quarterly updates are cumulative, so there will be no need to submit an amended return for the previous quarter, instead any errors can be corrected in the following quarterly submission. You will also need to correct the underlying digital records.
I jointly own a rental property; do I just report my share?
Yes, you only need to report your share of income and expenses relating to jointly owned property.
Because the threshold income is based on your personal circumstances and reflects all property and self-employed income that you receive in a year, it is possible that one of the owners has to comply with MTD for the year, and another owner does not.
There is also the option, for jointly owned properties only, to choose to report your share of income (not expenses) each quarter and then report your share of expenses annually via the final declaration, instead of in each quarterly submission.
My self-employed turnover is below the VAT threshold; do I need to provide detailed expenditure in my quarterly submissions?
If your income is below the VAT threshold (currently £90,000), you can use simplified “three-line accounts” which will mean reporting your total expenses each quarter, without the need to break these down into specific categories/expense types.
Will there be penalties for failing to file the quarterly submissions by the due date?
MTD penalties will follow a points-based system, aligning them with the system used for VAT. This means the more penalty points you accrue the larger the penalty that will be issued.
Penalty points expire after 2 years, and you only receive a penalty if you reach the penalty threshold. HMRC have also confirmed that they will not issue late filing penalties for the first four quarterly submissions, for those due to start using MTD for Income Tax from April 2026, to allow time for the system to bed down.
Will HMRC automatically register me for MTD?
No; HMRC will write to you following the submission of your Tax Return and notify you that your income exceeds the threshold and you need to start using Making Tax Digital for Income Tax from the start of the next tax year i.e. for 2024/25 Tax Returns, you will have to start using MTD for Income Tax from April 2026. However it is your responsibility to register for MTD, and this registration needs to be done before the start date.
I have heard that I may have to do more than one submission each quarter, is that true?
Potentially, yes.
A quarterly submission will be required for each self-employed business that you operate, as well as quarterly submissions for a UK rental business, and submissions for a foreign rental business.
It does not matter how many rental properties you have, these can be lumped together into one submission, they are only separated to the extent that they are UK or overseas property businesses.
For example, if you have a business as a gardener, but also undertake some self-employed consultancy work (completely unrelated to your gardening business), and you have a UK rental property, and two overseas holiday homes that you let out, you would need to file 4 submissions each quarter; one for each self-employed business, one UK rental business and one overseas rental business submission.
