MTD IT: Frequently Asked Questions

Over the past few years, tax expert Paul Aplin and Dext in-house specialist Paul Lodder have hosted numerous webinars on Making Tax Digital for Income Tax (MTD for IT). This FAQ brings together the most commonly asked questions from accountants and bookkeepers, providing clear and practical answers. The information in this document reflects Dext's current understanding of HMRC's rules at the time of writing.

1. General Overview

What is MTD for Income Tax?

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-of-year declaration. The final declaration will effectively replace the requirement to submit a self-assessment tax return.

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

• From 6 April 2026, individuals with combined annual turnover from self-employment 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 expenses.

• From 6 April 2027, this threshold reduces to £30,000 and whether they exceed the limit will be tested based on the 2025/26 return.

• The government intends to reduce the threshold further to £20,000 during this parliament (from a date to be confirmed).

Key point: The threshold is based on turnover and gross rent, not profit, and only considers income from self-employment and/or property.

1.3 How is mandation determined?

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.

Does HMRC support multiple agents for MTD for Income Tax?

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.

Read the full article for more details on:

• Registration and Timelines

• Record-keeping software

• Quarterly updates and finalisation

• Property income

• Multiple trades and income sources

• Penalties and compliance

• Voluntary registration and beta testing

• Exemptions

• Finalisation

• Additional points and reminders

• Frequently referenced legislation and guidance

Read the full details from Dext now - https://dext.com/uk/blog/single/mtd-test