Digital Record Keeping and Quarterly Reporting Requirements for Traders and Landlords (“MTD”)

Updates are continuing to come through on HMRC’s ‘Making Tax Digital for Income Tax’ (‘MTD for IT’) initiative. It will initially apply from 6 April 2026 for sole traders and property landlords who generated gross trade and rental income (‘qualifying income’) of more than £50,000 in the 2024/25 tax year.

This will be followed by those with qualifying income of more than £30,000 in the 2025/26 tax year being mandated to comply from 6 April 2027.

It has now been announced that those with qualifying income over £20,000 in 2026/27 will be mandated to comply from 6 April 2028.

The MTD for IT rules are mandatory and, if affected, you will be required to use ‘MTD-compatible software’ to maintain digital records and send a quarterly summary of your business and/or property income and expenses to HMRC. This will be in addition to an end-of-year tax return. It has now been confirmed that, for those mandated into MTD for IT, the end-of-year tax return must also be submitted using MTD-compatible software. It will not be possible to use a free HMRC online service.

Other MTD for IT changes announced at the Spring Statement were:

●      A limited list of types of individual who will have an exemption or deferral from MTD for IT.

●      The ability for those with 31 March year ends to start complying with the MTD for IT requirements on 1 April instead of 6 April, which will remove the need for manual adjustments at the start of the tax year.

There are various ways to remain compliant under the new rules, and options exist to ‘trial’ the new MTD system voluntarily before the 6 April 2026 start date. Please talk to us if you would like to know more.