MTD To Expand To Income Tax In 2026 – Get Ready!
The Making Tax Digital (MTD) regime is set to begin applying to income tax soon, and the first people to be brought into the regime will be the self-employed and landlords. Although April 2026, which is when relevant taxpayers must sign up to file digitally, sounds a long time away, it will arrive sooner than you think, and you need to be ready for the changes to avoid the chance of a penalty.
From April 2026, any self-employed person or landlord earning more than £50,000 a year from their self-employed income or property income, will need to sign up to the scheme and file their tax return digitally. Also, instead of filing once a year like you do now, you will instead be asked to send HMRC quarterly updates through compatible software. There are many different brands of software that would be suitable, so finding the right one for you is something you could start working on now in consultation with your accountant.
Even though the first sign-ups for MTD for income tax will be for those earning more than £50,000 a year, anyone earning income of more than £30,000 will also have to sign up to the regime by April 2027.
What if I earn less than £30,000?
If you earn less than £30,000 you can still sign up for the scheme voluntarily, but you will not be forced to join in these early stages. But there might still be some benefits to signing up early. Currently, HMRC is running a testing phase to find out how to make the expansion of MTD work best for the self-employed and landlords. This means if you sign up early, you may have a chance to help shape the outcome.
It will also help you to get to grips with the new system before you are obliged to use it, so you feel more confident in everything you need to do before the April 2026 or deadlines arrive.
You will also have access to a dedicated customer support team as an early adopter, who will help you understand and resolve any issues you have with filing under the new regime. Plus, you and your accountant would be supported through the process for your other tax affairs – including PAYE and self-assessment for the 2024/25 financial year.
How do I join up?
Around 780,000 people are expected to qualify to join the first phase of this round of MTD. The aim for HMRC is to improve record keeping, as you must file quarterly, and everything will be held digitally which should also reduce the number of errors on your taxes.
If you want to join up in this phase, then please contact your accountant and they can help you. They can sign up as many of their eligible clients as they want to, and this is the best way to access the new regime as you then have the backing and help of an expert to guide you through any problems. But if you want to sign up separately, you can do that providing you’re eligible.
To be eligible, there are various rules and regulations, so you need to check if any of them apply to you. These details are outlined on the Gov.uk website:
You can sign up voluntarily if (all the following):
- your personal details are up to date with HMRC
- you’re a UK resident
- you have a National Insurance number
- you have submitted at least one Self-Assessment tax return
- you’re up to date with your tax records — for example, you have no outstanding tax liabilities
- you use an accounting period that runs from 6 April to 5 April
You can also use an accounting period that runs from 1 April to 31 March, if the software you choose supports this. To use this accounting period, you must:
- select calendar update periods in the software before the first update is made
- make an adjustment at the end of your first tax year — so that your income and expenses from 1 April to 5 April are included in your tax return
If you sign up, during testing you will not be able to:
- claim carry back of losses
- change your accounting period
- change your accounting method
You cannot sign up voluntarily if you:
- have a High-Income Child Benefit Charge
- have a payment plan with HMRC
- are a partner in a partnership
- claim Married Couple’s Allowance
- claim Blind Person’s Allowance
- are currently, or are going to be, bankrupt or insolvent
- are an MP, minister of religion or Lloyd’s underwriter
- have income from being a foster carer or being in a shared lives scheme
- have income from a trust
- have income from a jointly owned property
- have income from a furnished holiday let
- are subject to a compliance enquiry
- use ‘averaging’ or other arrangements because your profits vary between years — for example, because you’re a farmer, writer or artist
- are signing up on behalf of someone else (unless you’re an agent) — this includes (but is not limited to) if you’re:
- an insolvency practitioner
- a nominee
- a solicitor
Source: Gov.uk.
What software will I need to use?
There are many different types of software you can use to file digitally online, and some do not charge you to use them. But it isn’t as easy as just signing up to any software as which will suite you best will depend on what data you need to hold, how simple your tax affairs are, and how tech savvy you are.
All of the compatible software options can be found on Gov.uk, and while there are a few that are currently working, many more are being developed by some of the biggest names in online accounting. Again, you can ask your accountant for guidance on which would work best for you if you are unsure.
The new regime will mean more admin for those joining up, and collectively for everyone who is eligible and is earning more than £30,000, the cost of implementing the new regime is expected to be £561m as a one-off. But filing more regularly and keeping better records online is likely to help you with other areas of your finances too. So, there are additional benefits to signing up early.
There are many aspects of the changes to the MTD regime that you may not feel comfortable with, but if you have any queries then please get in touch with us and we would be delighted to help you.
