There’s less than one year to go until an estimated 780,000 self-assessment customers are required to file returns using Making Tax Digital (MTD).
Up until now MTD has only applied to VAT reporting, but from April 6 2026 it will be extended to include income tax returns for sole traders and landlords.
In this month’s Sysum Howard Duggan blog, we’re sharing the advice of consumer champions Which? by answering four key questions about MTD.
What is Making Tax Digital? The process involves keeping digital records of accounts and sending summaries to HMRC every three months, instead of filing one final return annually. Submitting figures more often will help people keep track of how much tax they owe in real time, making it easier to budget for their tax bill.
Who will the new rules affect? MTD was originally launched in 2019 for businesses that pay VAT and have a turnover of more than £85,000. It was extended in 2022 to include all VAT-registered businesses. Here’s how the different groups will be brought in:
- From April 2026: Self-employed individuals such as sole traders and landlords with a gross income (amount before deductions) of more than £50,000 – made during the 2024-25 tax year.
- From April 2027: Those earning between £30,000 and £50,000 in the 2025-26 tax year.
- From April 2028: The threshold will then decrease to £20,000.
How will the process change? Once you have submitted your quarterly summary of income, you will get an estimate of the tax due. A final report will still need to be sent by January 31st, either through your MTD software or a self-assessment tax return. At this point, your final tax bill for the year will be calculated.
The payment deadline will stay the same – January 31. This will still be the date you make your first payments on account instalment, with the second due by July 31.
Are there penalties for late filing? There will be if you’re late submitting your quarterly tax summaries, but they’re not as harsh as those for submitting a late tax return or tax payment.
The penalty system has been altered to encourage good behaviour, rather than as a punishment. It will work in a similar way to how speeding fines are issued, with a point added each time a deadline is missed.
After a certain number of points is reached, taxpayers will have to pay an automatic fine of £200. The points threshold varies depending on how often you are required to make submissions to HMRC – the more frequent, the higher the threshold.
Points accrue separately for those who use MTD for VAT and income tax. If you go beyond the tax threshold for both, you could face two fines of £200 each.
If you’re unsure about how MTD will affect your business, the friendly team at Sysum Howard Duggan are here to help. Just give us a call on 01905 622202.