Making Tax Digital for Income Tax - Frequently Asked Questions
Posted on 16th April 2025 at 20:10
From April 2026, big changes are coming to the way many self-employed individuals and landlords report their income. Making Tax Digital (MTD) for Income Tax will be a mandatory system for thousands across the UK – but with change comes confusion.
To make the transition easier, we’ve answered some of the most frequently asked questions to help you feel confident and prepared. If you haven’t seen our introductory guide yet, all of that can be found here.
What Is Making Tax Digital (MTD) for Income Tax?
MTD for Income Tax requires certain individuals — specifically sole traders and landlords — to:
Keep digital records of income and expenses, and
Submit quarterly updates to HMRC, followed by
A final end-of-year declaration, replacing the traditional Self Assessment tax return.
Who Needs to Comply – and When?
MTD will be phased in based on your total gross income (before expenses) from self-employment and/or property:
From 6 April 2026: Over £50,000
From 6 April 2027: Over £30,000
From 6 April 2028: Over £20,000
These thresholds are determined using your income from two years prior (the CY-2 rule) based on your Self Assessment tax return.
Do Limited Companies or Partnerships Need to Join?
Not yet.
MTD for Income Tax currently applies only to individuals. Partnerships will be included in the future, but no start date has been confirmed. Likewise, MTD for Corporation Tax is still to come.
Do I Have to Use Software?
Yes — manual submissions aren’t allowed. You’ll need HMRC-compliant software, such as:
Certified bookkeeping software
Excel with “bridging” software
💡 Need help finding a cost-effective option? We can recommend and support you in getting set up early, so you’re confident before it becomes mandatory.
Quarterly Updates: What to Expect
Will I Need to File Four Tax Returns Per Year?
Not exactly. You’ll submit:
4 quarterly updates per self-employment business
4 quarterly updates for UK property income (combined)
4 for overseas properties (if applicable)
1 final declaration at year-end to finalise everything
These quarterly updates are summaries, not detailed accounts.
MTD for VAT continues separately if you’re VAT-registered.
Deadlines?
You’ll have 1 month + 7 days after each quarter to submit. You can choose to report using:
Tax-year quarters (e.g., 6 Apr–5 July), or
Calendar quarters (e.g., 1 Apr–30 June)
All updates are cumulative, meaning errors can be corrected in later updates.
Can I File Early?
Yes — up to 10 days before the quarter ends, if your figures are final.
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Common Questions
What if I Own Property Jointly?
MTD applies based on each individual’s share of the income.
I Run Two Small Businesses — Are They Counted Separately?
No. If your combined income exceeds the threshold, MTD applies.
Do Dividends or Employment Income Count Toward the Threshold?
No — only self-employment and property income are included.
Do MTD and VAT Quarters Have to Match?
No. You can align them if it makes life easier, but it’s not required.
What About Capital Allowances?
Capital items are not included in quarterly updates. They’re added in the final declaration.
Will I Have to Pay Tax Quarterly? No — tax payment dates remain unchanged under Self Assessment.
What If I Cross the Threshold Mid-Year?
You won’t be required to join MTD part-way through a tax year. Instead, MTD for Income Tax starts from the beginning of a tax year, based on your income from two years earlier — this is known as the CY-2 rule.
For example, to be required to join MTD from 6 April 2026, your total gross income from self-employment and/or property would need to exceed £50,000 in the 2024/25 tax year. Even if your income increases mid-year, you won’t enter MTD until the start of the tax year following HMRC's assessment, based on your earlier Self Assessment return.
What If I Have Multiple Businesses or Properties?
Each income stream needs its own updates:
Business A: 4 updates
Business B: 4 updates
UK property: 4 updates
Overseas property: 4 updates
Final declaration: 1 update
Penalties and Compliance
From April 2026, HMRC introduces a points-based penalty system:
1 point per missed deadline
4 points = £200 fine
Points cover all your required quarterly submissions, not each one separately
⚠️ No penalties apply during the current voluntary testing phase.
Exemptions
Currently, trusts and estates are not required to join MTD for Income Tax.
Key Reminders
✅ Thresholds apply only to self-employment and property income
✅ The CY-2 rule determines when you must comply
✅ Once in MTD, you’re committed for at least 3 years
✅ Quarterly deadlines are strict — plan ahead
✅ We're here to guide you every step of the way
Final Thoughts
Making Tax Digital for Income Tax marks the most significant shift in personal tax reporting in decades. While it may seem overwhelming at first, getting ahead of the changes now will reduce stress later.
At Property Tax Advice, we’re already supporting clients with:
Choosing the right software
Setting up digital record-keeping
Training for compliance
Let us help you manage the tax, before the tax starts managing you.
Join Our Free Live Webinar – 30th April 📅
Want to learn more? We’re hosting a free webinar on Wednesday 30th April, covering everything from key deadlines to choosing software — with time for Q&A.
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