Who is affected?
From April 2026, sole traders and landlords with gross income exceeding £50,000 will be required to use MTD. This threshold reduces to £30,000 from April 2027. It has been confirmed that the threshold will be reduced further to £20,000 from April 2028. For those who are self-employed and receive property income, the gross annual income figure is the combined gross income from both sources.
When deciding whether MTD applies for 2026/27, HMRC will review income from the 2024/25 tax year. Those who exceed the £50,000 threshold will be notified that they must comply with MTD from April 2026. HMRC will review information on self-assessment tax returns each year to determine who must comply.
It is expected that MTD will also become mandatory for partnerships however a timeline for this has not yet been confirmed.
What is required?
A key element of MTD is the requirement to keep digital records of business/property income and expenses. Maintaining paper records will no longer meet the legislative requirements therefore it will be necessary to use an electronic records-keeping system. HMRC have confirmed that they will not be producing their own software however products to meet the MTD requirements are still in development with many software companies.
Unlike annual self-assessment, quarterly updates must be submitted to HMRC to report the business/property income and expenses for that period, applying cumulatively to cover the following periods each tax year:
- 6 April to 5 July (due by 5 August)
- 6 April to 5 October (due by 5 November)
- 6 April to 5 January (due by 5 February)
- 6 April to 5 April (due by 5 May)
Although it does not change the due date for the quarterly submissions, taxpayers can elect to report using full calendar months if it is more convenient.
After the end of the tax year a final declaration will be required to finalise the tax position for the year, including any tax or accounting adjustments required to business income as well as any personal income or claims for other reliefs. This will be due by 31 January after the relevant tax year. MTD does not currently alter the deadlines for paying income taxes.
Exemptions
Individuals who are unable to obtain a national insurance number and those with qualifying care receipts (shared lives care and foster carers) will not be required to comply with MTD.
It will also be possible to apply for an exemption to MTD under certain circumstances. These include individuals who are digitally excluded because of age, disability, location, religious grounds or it is not reasonable or practical to use a computer for other reasons. Exemptions will be considered on a case by case basis, HMRC have not currently released any information on how to apply for an exemption however we expect details of this to emerge in due course.
Next steps
While some elements of MTD are still unclear, those who think they might be affected from the outset should consider taking appropriate steps as soon as possible to ensure they are in a position to comply with MTD from April 2026. It is possible to take part now on a voluntary basis via HMRC’s pilot scheme to assist in testing the system however further details should be sought to determine eligibility.
If you would like to discuss any matters relating to MTD, please do get in touch.
