Question 1

What is MTD for Income Tax?

Accepted Answer

Making Tax Digital (MTD) for Income Tax will require certain taxpayers (sole traders and landlords) to maintain digital records and submit quarterly updates of their income and expenses to HMRC, followed by a final end-ofyear declaration. The final declaration will effectively replace the requirement to submit a self-assessment tax return.

Question 2

Who must comply with MTD for Income Tax from April 2026?

Accepted Answer

From 6 April 2026, individuals with combined annual turnover from selfemployment and/or gross property rental income exceeding £50,000 will need to comply. Whether they exceed the limit will be tested based on their 2024/25 Self Assessment tax return. It is important to note that these figures are gross income, before any deduction of expenses1
From 6 April 2027, this threshold reduces to £30,000 and whether they exceed the limit will be tested based on the 2025/26 return1
From 6 April 2028, this threshold reduces to £20,000 and whether they exceed the limit will be tested based on the 2026/27 return.

Question 3

How is mandation determined?

Accepted Answer

Mandation is based on a "current year minus two" (CY-2) rule. For instance, to be mandated from April 2026, HMRC looks at the Self Assessment tax return for 2024/25 (due by 31 January 2026). If turnover and/or gross rent exceeded the threshold on that return, MTD for Income Tax applies for that taxpayer from April 2026. Mandation for April 2027 is based on the 2025/26 self-assessment return, which must be submitted by 31 January 2027. Once mandated, a business remains within MTD for a minimum of three years.

Question 4

Does HMRC support multiple agents for MTD for Income Tax?

Accepted Answer

Yes, or rather it will very soon. A taxpayer will be able to authorise more than one agent, for instance one agent for bookkeeping and quarterly submissions (the “Supporting Agent”) and another for finalisation of the position for the tax year (the “Main Agent”). Each agent will need the appropriate authority to act on the client's behalf. The supporting agent will not be able to view in-year tax calculations or deal with the finalisation. HMRC has agreed to incorporate this facility in response to representations from professional bodies.

Question 5

When and how will HMRC notify agents and taxpayers about MTD for Income Tax?

Accepted Answer

February 2025: Agent update 128 (advising agents that clients will receive communication)
March 2025: Agents notified which clients may be in scope
April–May 2025: Pre-mandation letters to taxpayers with income > £50k, inviting them to join the pilot (“beta”)
May–June 2025: Further letters to remaining taxpayers with income > £50k and those with income between £45k–£50k.

Question 6

When do I need to sign up a client for MTD IT?

Accepted Answer

Formal mandation for those over the threshold starts from 6 April 2026 (or 6 April 2027 if gross turnover and/or rent is over £30k).

You can voluntarily sign up earlier (e.g., during the pilot or, as HMRC prefers to call it, “beta testing” phase).

It is often simpler to join at the start of a tax year, but you can register at any time and catch up any missed quarterly updates.

Penalties do not apply to late quarterly returns during the beta testing phase.

Question 7

Does a client register themselves or can their agent do it?

Accepted Answer

Either is possible. An agent can register clients on their behalf, though this currently has to be done individually rather than in bulk.

Question 8

What if my business starts part way through a tax year, when does MTD IT apply?

Accepted Answer

If you begin a new business after MTD IT is in effect, your official digital start date will usually be 6 April of the year following the tax year in which you first have to file a Self Assessment return for that new business. This is the CY-2 rule.

Question 9

What if I start a second business after my first business is already under MTD?

Accepted Answer

Each individual business has its own digital start date. You may end up submitting multiple sets of quarterly updates, one for each business, once each crosses its start date or threshold. Again, the CY-2 rule applies.

Question 10

What about partnerships and limited companies?

Accepted Answer

The government intends to bring partnerships within MTD for Income Tax from a date that has yet to be announced. No date has been announced for the start of MTD for Corporation Tax.

Question 11

Is it mandatory to use software for MTD for Income Tax?

Accepted Answer

Yes. Businesses must keep digital records and submit quarterly updates via software compatible with HMRC's MTD requirements. Submitting manually (e.g., typing information directly into HMRC's website) is not permitted.

You may use:

Bookkeeping software HMRC-certified for MTD for Income Tax
Spreadsheet software (such as Excel), but you must then use bridging software to send the required data to HMRC.

Question 12

What happens if I already have bookkeeping software for VAT?

Accepted Answer

You will still need to submit separate quarterly updates for MTD for Income Tax. If VAT quarters do not align with MTD for Income Tax quarters, you will need to manage both schedules.

It's essential to keep digital records in, or as close as possible to, real time to avoid confusion, although this may require additional client education and workflow planning.

It is important to note that all businesses and landlords within the scope of MTD for Income Tax will be required to use the same quarters coinciding with the tax year or calendar quarters. The requirement is set in legislation. This does not affect MTD for VAT.

If a business has an accounting year that does not align with one of the MTD for Income Tax quarters, the MTD for VAT quarters may therefore not align with the MTD for Income Tax quarters.

In such cases, consideration will need to be given to whether to align the MTD for VAT quarters with the MTD for Income Tax quarters.

Question 13

Can I use different software for quarterly updates and the final return?

Accepted Answer

Yes. Multiple software solutions are allowed as long as they are HMRC-approved. HMRC stores all quarterly submissions, so your final submission software can pull the relevant data from HMRC rather than having to connect directly to your tax and/or bookkeeping platform.

For example, you can use Dext Solo for quarterly submissions and then use your existing tax software for finalisation (as long as it is HMRC MTD for Income Tax approved).

Question 14

Are there four separate tax returns each year?

Accepted Answer

No. You will submit

Four quarterly updates of income and expenses for each self employment
Four quarterly updates of income and expenses for all UK properties combined
Four quarterly updates of income and expenditure for all overseas properties combined
One final declaration at year-end to adjust for any tax or accounting items and confirm the final figures.

The quarterly updates contain summary totals and not the individual detailed transaction data.

Many individuals will of course also be required to submit four quarterly MTD for VAT returns.

Question 15

How long after the end of a quarter do I have to submit the information?

Accepted Answer

Quarterly updates must be submitted within about 1 month (technically 1 month + 7 days if calendar quarters) following each quarter-end. For example, if the quarter ends on 5 July, the update must be submitted by 7 August.

You can choose between using

The default tax-year quarters (6 April–5 July, 6 July–5 October, etc.) or
Calendar quarters (1 April–30 June, 1 July– 30 September, etc.) by making an election.

Quarterly submissions are year to date - 6th April - 5th July and then 6th April to 5th October and so on. This is a significant improvement - and the direct result of discussion between HMRC and the professional bodies - on the original proposal that each quarter would be “stand-alone” and not cumulative, because errors and omissions will now be corrected on a cumulative basis, without the need to re-file and earlier re turn.

Errors and omissions must be corrected promptly and in any event by the time the next quarterly return after discovery is filed. No other custom quarter dates are permitted under MTD for Income Tax. The fact that the MTD for Income Tax quarter dates are set in this way will create issues for some taxpayers whose businesses have accounting years that do not coincide with the quarter dates. The problems arise because their MTD for VAT quarters may be different - as noted at 3.2 - and because of Basis Period Reform

Question 16

Do I need to make quarterly tax payments?

Accepted Answer

No. There is no change to payment deadlines. Tax remains payable under the usual Self Assessment due dates.

Question 17

Can quarterly updates use the cash basis, while the final return   uses accruals?

Accepted Answer

It is preferable to use one accounting method (cash or accruals) consistently. Mixing methods within the same year can be complex and could lead to any in year tax calculations yielding misleading results.

Question 18

How are capital allowances handled in the quarterly updates?

Accepted Answer

You only report income and expenses in the quarterly updates. Capital items (e.g., equipment) are factored in at the final declaration stage through capital allowances. The effect on any in year tax calculations must be borne in mind.

Question 19

Can I align my quarterly updates   with calendar quarters instead of tax-year quarters?

Accepted Answer

Yes. You can make a calendar quarter election with HMRC before submitting your first quarterly update of the tax year. From then on, you'll report based on calendar quarters. You can withdraw or change this election later, but timing rules apply. The date by which the quarterly return must be filed is unaffected by the election.

Question 20

Can I submit a quarterly update early if I'm going on holiday?

Accepted Answer

Yes, provided you're reasonably sure there won't be any more income or expenses in the final days of that quarter. If something does come in after you file early, simply include it in the next update. You can submit up to 10 days early.

Question 21

What if my business ceases during the year. Do I still file the final quarterly update?

Accepted Answer

Yes. You file a partial period update covering the date after your last update through to the date you closed the business. You must also inform HMRC of your cessation date by the deadline for that quarter.

Question 22

How do I correct mistakes in my digital records after submitting a quarterly update?

Accepted Answer

As soon as you spot an error or omission, you will need to correct your digital records. If you haven't made your final update for that period, you should include the corrected figures in your next quarterly update. This will ensure HMRC receives the updated information.

Question 23

Can l do 3-line submissions? What is the threshold?

Accepted Answer

Yes. HMRC allows "3-line accounts" (total income, total expenses, net profit) for those mandated under a certain turnover threshold (currently the VAT threshold). This applies to both the self employed and to landlords. Only a single category is needed for each source of income and a single category for the associated expenses, with one exception: landlords must record finance costs such as mortgage interest separately (because of the way relief is given for such costs). This does not however remove the obligation to keep digital records using MTD for Income Tax compliant software. It is simply a carry over of the current reporting easement for Self Assessment into the MTD for Income Tax regime.

Question 24

Do quarterly updates need a balance sheet?

Accepted Answer

No. Quarterly updates only require income and expense figures. You do not need to submit a balance sheet at the quarterly stage. Any detailed accounting adjustments will be made in your final (year-end) submission if needed.

Question 25

Will I need to change my VAT quarters to align with MTD for IT quarters?

Accepted Answer

No, you do not have to align your VAT quarters with your MTD for Income Tax quarters. While some businesses might choose to align them for convenience, it is not mandatory. You would simply file each set of quarterly obligations (VAT and MTD for Income Tax) as they fall due on their own schedules.

Question 26

How will Basis Period Reform (BPR) affect things?

Accepted Answer

BPR will impact businesses that have accounting years that do not end on 31 March, or on 1, 2, 3, 4 or 5 April. This is because the assessable profits will be based on the time apportioned profits of each accounting period any part of which falls into the tax year. Adjustments will have to be made in the final submission for the year and in many cases it will be impossible to do this based on the MTD for Income Tax quarters.

Question 27

What is included in the quarterly returns?

Accepted Answer

The quarterly returns contain summary income and expenditure information in set categories. The categories are broadly similar to those used in the current self-assessment return for self-employment and property income. Individual transaction details are not part of the quarterly returns - that level of detail remains in the taxpayers software.

Question 28

How is property income reported under MTD for Income Tax?

Accepted Answer

Landlords whose gross rents (or gross rents when combined with self employed turnover) exceed the turnover threshold must keep digital records and submit quarterly updates of rental income and allowable expenses.

Question 29

What if property is jointly owned?

Accepted Answer

Joint owners should apportion property income and expenses (as now). Each co-owner's share is tested against the threshold. For instance, if a property generates £60,000 total rent split 50/50, each person has £30,000 for the purpose of the threshold test.

Question 30

If someone exceeds the threshold mid-year, do they start quarterly reporting immediately?

Accepted Answer

No. MTD status is generally determined two tax years prior. If the taxpayer wasn't mandated at the start of the year, crossing mid-year won't trigger MTD for Income Tax until the next April after HMRC has looked at the relevant tax return.

Question 31

Are there any relaxations to the rules for jointly let property?

Accepted Answer

Yes. HMRC has made two relaxations to the rules:

Joint property owners can choose to report rental income gross on the quarterly returns and then report expenses as a part of the year end finalisation process.
Joint property owners can also create a single digital record for each income and expense category, removing the need for each joint property owner to maintain digital records for each transaction.

These relaxations apply only to income and expenses from jointly let property and not to other rental income and expenses in the taxpayer’s own (sole) name.

Residential property finance costs (such as mortgage interest) must be shown as a separate expense figure (because of the way relief is given for such costs).

Joint property owners and their agents will need to think carefully about whether they wish to make use of these relaxations. The first merely defers the point at which expenses have to be reported (and leaving expenses out of the quarterly returns will affect the accuracy of any in-year calculations) and the second may create issues in future if HMRC opens an enquiry and requests full transaction detail.

Question 32

Does MTD for Income Tax apply if a client has more than one self-employment or rental property business?

Accepted Answer

Yes. Each self-employment business requires its own quarterly updates, and a landlord with rental income also submits quarterly updates. For example:

Self-Employed Business One: 4 quarterly updates
Self-Employed Business Two: 4 quarterly updates
UK Rental Property (combined for all such properties): 4 quarterly updates
Overseas Rental Property (combined for all such properties): 4 quarterly updates
End-of-year final declaration: 1 submission

Question 33

Does having two trades each below £50,000 matter if their combined turnover exceeds £50,000?

Accepted Answer

Yes. If the total qualifying turnover (selfemployment plus rental) is above the threshold, MTD for Income Tax applies.

Question 34

Are personal income sources   (e.g., employment, dividends) included for MTD for Income Tax threshold calculations?

Accepted Answer

No. MTD thresholds only consider selfemployment and property income.

Question 35

Will there be penalties for late or missing quarterly updates?

Accepted Answer

Yes, beginning in April 2026 for those over £50,000 turnover. There will be a new, points-based penalty system mirroring - but operated independently of - the one used for MTD for VAT:

One penalty point per missed submission deadline.
After four points, a financial penalty of £200 is charged.

Question 36

What if a client's Self Assessment return is late, making them miss their MTD start date?

Accepted Answer

HMRC may still require quarterly updates from the start of the mandated year. Late filing can lead to penalties under the existing system or, once it applies to a particular taxpayer, penalty points and eventually a penalty once the threshold is met.

Question 37

Can I voluntarily sign a client up   for MTD for Income Tax before they are mandated?

Accepted Answer

Yes. This allows you and your clients to get used to the system. You can join at any point in the year (often simpler at 6 April), then submit any missed quarters. The client will be subject to the new penalty regime, except that it will not operate in respect of late MTD for Income Tax quarterly returns during the beta phase.

Question 38

Do agents need permission from clients to register them for testing?

Accepted Answer

Yes. You must have the client's consent before registering them in the beta.

Question 39

Who can be exempt from MTD for Income Tax?

Accepted Answer

HMRC may exempt taxpayers who cannot engage digitally due to:

Disability
Location (e.g., no reliable internet access)
Incompatible religious beliefs

If your circumstances change (e.g., you get reliable internet), you must notify HMRC and will then likely come under MTD for the next relevant tax year. The following groups will not be required to use MTD for Income Tax:

Customers who have a Power of Attorney
Non-UK resident foreign entertainers and sportspeople who have no other income sources that count as qualifying income for MTD
Customers for whom HMRC cannot provide a digital service

Additionally, individuals will not be required to use MTD until April 2027 if they have information that they would need to submit using the SA109 schedule (residence, remittance basis). The following groups will not be required to join MTD for Income Tax over the course of this Parliament:

Ministers of religio
Lloyd’s Underwriters
Recipients of the Married Couples’ Allowance
Recipients of the Blind Persons’ Allowance

Question 40

What about trusts and estates?

Accepted Answer

Trusts and estates are not included in the MTD for Income Tax regime.

Question 41

If I'm non-UK domiciled or nonresident, do I have to include my foreign businesses in MTD?

Accepted Answer

If you're not UK-domiciled or not UK resident for a particular tax year, your foreign businesses are generally excluded from MTD for Income Tax. However, any UK-based business or rental income above the threshold would still require MTD for Income Tax submissions.

Question 42

What happens in finalisation?

Accepted Answer

The finalisation software will retrieve the final (cumulative) quarterly update information from HMRC. Accounting and tax adjustments are then made to the self-employment income and the MTD for Income Tax information is then consolidated with all other sources of income and gains, reliefs and deductions as would be done when preparing the self-assessment return. Once this exercise is complete, the finalisation submission is made to HMRC.

Finalisation will in many cases be done in different software to that used for the preparation and filing of the quarterly returns, but some software will have end-to-end functionality enabling both preparation/ submission of the quarterly returns and finalisation. The choice will be down to the taxpayer and their agent(s) deciding on what is best in their particular circumstances.

MTD IT explained

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This comprehensive FAQ guide brings together the most common MTD questions from accountants and bookkeepers

General overview and mandation criteria

Registration and Timelines

Record-Keeping and Software

Quarterly Updates and Finalisation

Property Income

Multiple Trades or Income Sources

Penalties and Compliance

Voluntary Registration and Beta Testing

Exemptions

Finalisation

Additional Points and Reminders

Threshold Based on Turnover:

Two-Year Look-Back:

Three-Year Minimum:

Other Income Sources:

Submission Deadlines:

Conclusion

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