Making Tax Digital

June 2025

What is MTD?

MTD stands for Making Tax Digital. It is an HMRC initiative designed to modernise and digitalise tax reporting.

Under MTD, businesses and individuals are required to keep digital records and submit tax information to HMRC using compatible software. 

The aim is to make tax administration more effective and efficient, while also reducing errors and improving compliance.

MTD was first introduced for VAT in 2019 and is now being extended to Income Tax.

A key change of this next wave is that many taxpayers will now need to submit quarterly updates online in addition to existing once a year self-assessment.

Who will MTD affect?

MTD will impact individuals who receive income from self-employment and / or property. Importantly, it is gross income (before expenses or reliefs) that counts towards the thresholds. Income from employment, pensions, dividends or interest does not.

It is being gradually rolled out in phases, bringing more taxpayers into scope over time:

  • From 6 April 2026 – sole traders and landlords with combined gross self employment sales and rental income over £50,000 (in the 2024-25 tax year) must comply
  • From 6 April 2027 – the threshold lowers to £30,000 (based on the previous tax year’s gross income)
  • Future phases – HMRC is expected to expand MTD to those earning more than £20,000 from April 2028 although this date is yet to be fully confirmed.

Given the phased roll out, even if you are not affected until later, it is wise to start preparing now to make the transition smoother and give you more confidence when the rules apply to you.

What do I need to do?

If you fall within the thresholds for MTD, you will need to make some changes to how you record and report your income:

  1. Use MTD-approved software:  All submissions to HMRC must be made through approved MTD software. This software connects directly to HMRC, ensuring your quarterly updates and annual declaration are submitted correctly
  2. Keep digital records: You must record your income and expenses in a digital format.
  3. Submit quarterly updates: In addition to your annual self assessment, you will need to send four quarterly updates of your income and expenses to HMRC. These updates provide HMRC with a real-time view of your tax position. Please note the quarterly updates are for reporting purposes only. There is currently no change to existing tax payment dates of 31 July and 31 January.

 

How we can help

At Cadence, we know that Making Tax Digital can feel like a big change – but you don’t have to navigate it alone. Our team can:

  1. Check if and when you’ll be affected based on your income and circumstances
  2. Set you up with the right software so your records are compliant and easy to manage
  3. Handle quarterly submissions on your behalf, giving you peace of mind that everything is filed correctly and on time
  4. Provide ongoing support and advice so you always understand your tax position and ensure no surprises at year-end

By planning ahead now, you will save time, reduce stress and stay fully compliant when MTD comes into effect.