Making Tax Digital (MTD) is by no means a new concept. Since April 2022, VAT-registered companies have been required to submit more documentation to HMRC in an attempt to create more accurate, real-time tax reporting.
However, by 2026, many landlords and self-employed individuals will also become subject to this increased level of reporting under Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA).
In this article, we will answer some of the frequently asked questions concerning MTD to provide you with a comprehensive guide that will prepare you for a smooth transition and ongoing compliance.
1) What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) requires those who submit a self-assessment to input quarterly reports of income throughout the tax year, as well as a final declaration. This replaces the current method of one all-encompassing end-of-year self-assessment.
This increased level of documentation can easily feel daunting to a business owner whose time is already stretched, which is why two important factors come into play to help ease the transition and minimise admin time:
– Firstly, individuals should check their eligibility (see below) as you may have longer to comply than you think if your income does not meet the current threshold.
– Secondly, you should always seek professional guidance to help you navigate the process. As well as giving you valuable advice and ensuring your compliance, they may also be able to recommend, or even implement, MTD-recognised software that will help keep your books on track in the background.
2) Who is eligible for MTD?
According to the UK government, approximately 780,000 freelancers, sole-traders, contractors, business owners, and landlords will initially be impacted by the MTD roll-out, with an additional 970,000 individuals joining them at the next threshold increase.[1]
So, how does the current eligibility break down?
Making Tax Digital will apply to all self-employed individuals (e.g. sole traders), landlords, and those who derive passive income from real estate. However, you will only need to begin conforming with the MTD requirements once your qualifying income[2] meets one of the staged thresholds. These qualifying income thresholds are as follows:
- If your qualifying income exceeded £50,000 for the 2024/25 tax year, you need to comply with MTD from 6 April 2026 onwards
- If it exceeds £30,000 for the 2025/26 tax year, you need to comply from 6 April 2027 onwards
- If it exceeds £20,000 for the 2026/27 tax year, you need to comply from 6 April 2028 onwards
If your income changes and takes you into a lower threshold, this does not exempt you from MTD. Instead, your income must remain at this same lower level for three consecutive tax years before you can become exempt from compliance.
3) Is anyone automatically exempt from MTD?
Certain automatic exemptions are in place to protect certain groups and individuals from having to comply with MTD. These include[3]:
- Those with a qualifying income of £20,000 or less
- Those who do not have a National Insurance number
Other exemptions
- Someone who is filing on behalf of a non-resident company
- A trustee, including a charitable trustee or a trustee of a non-registered pension scheme
- A personal representative of someone who is deceased
Temporary exemptions may also be available, and more information can be found in the Government’s guidance on MTD.
It is also worth noting that, though within the scope of income tax for the purposes of MTD, partnerships have been temporarily removed from the conversation. It is expected that specific timelines will be created for partnerships, but, for now, the focus remains on the self-employed and landlords.
4) Are there ways to make MTD compliance easier?
Once you know you are eligible for MTD, it’s essential that you speak with an accountant. If you currently use accounting software to keep track of your income, expenses, and tax records, it may already be going through changes to become compliant with MTD. Your accountant will be able to verify this for you, or alternatively, help you set up MTD-recognised software, thereby reducing the amount of ongoing manual admin required.
Even if you do not think you are yet eligible to apply to MTD, it is still wise to speak to your accountant or financial professional early to ensure you know all the key dates and changing requirements.
If you would like further guidance on MTD, please get in touch with our team for a no-obligation consultation.
Acumen Financial Planning Ltd is authorised and regulated by the FCA, FRN 218745.
[1] GOV.UK. Making Tax Digital for Income Tax Self Assessment for sole traders and landlords, September 2025.
[2] Qualifying income refers to your turnover but excludes income from employment (PAYE), partnership profit shares, dividends (including from your own company), a State Pension, and private pensions. Please be aware that, though your turnover is used to assess whether you should apply to MTD, you will still pay income tax on your profit after deductible expenses, not your turnover.
[3] GOV.UK. Find out if you can get an exemption from Making Tax Digital for Income Tax, January 2026.