Ready for Making Tax Digital?
The tax reporting system is changing for the self-employed and property investors.
Making Tax Digital (MTD) has been one of those major government IT projects subject to significant delays. Announced in December 2015, it promised that “…by 2020, HMRC will have moved to a fully digital tax system.”
While MTD is now fully operative for VAT, it will not start to come into force for some elements of income tax until April 2026…and that could affect you.
Thresholds and implementation
MTD will apply to you from April 2026 if you are registered for self assessment and:
- You received income from self-employment and/or property investment before 6 April 2025; and
- You had a gross turnover (strictly ‘qualifying income’) from self-employment and/or property exceeding £50,000 in 2024/25.
A year later, the MTD threshold will be lowered to over £30,000 of qualifying income in 2025/26.
To encourage compliance with the new MTD regime, which demands quarterly reporting, new rates of late payment penalties for MTD for income tax (and VAT) took effect from April 2025. These are (in addition to late payment interest):
- 3% of the tax outstanding where tax is overdue by 15 days; plus
- 3% where tax is overdue by 30 days; plus
- 10% per annum where tax is overdue by 31 days or more.
If MTD is news to you, make sure you are prepared before your ‘joining’ date arrives.
The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.
