Making Tax Digital for Income Tax is now live

Who has to join and when?

The initial mandation is focused on individuals carrying on a trading business and/or a UK (or overseas) property business that is charged to UK income tax. Partnerships are intended to join later (date still to be confirmed), and certain categories are outside the regime altogether. These are discussed further below.

It is being phased in based on gross business receipts (turnover/rents, before expenses) reported on the tax return due on 31 January before the relevant tax year:

• From 6 April 2026: mandated where receipts are over £50,000;
• From 6 April 2027: mandated where receipts are over £30,000; and
• From 6 April 2028: mandated where receipts are over £20,000.

Key exemptions and deferrals

There are a variety of exemptions and deferrals, some of which will apply automatically and others that require an application to HMRC. These include:

• One-year deferral 2026/27 - some individuals who would otherwise join from April 2026 are deferred until April 2027. An automatic one-year deferral applies where the 2024/25 return includes certain complex entries, including trust/estate items on the SA107 supplementary page, residence/remittance entries on the SA109 supplementary page, averaging relief claims (farmers and creative artists) and foster/kinship care income. A similar deferral can apply where these types of entries are expected to arise in 2026/27, but this is not automatic and will usually require an application to be made to HMRC. The regulations also recognise that a reasonable expectation of needing to use the new foreign income and gains (FIG) rules for new residents, or to make designations under the temporary repatriation facility for former remittance basis users, can support a 2026/27 deferral application. N.B. HMRC have confirmed that any taxpayer that has included the SA107 or SA109 supplementary page in their 2024/25 tax return will be unable to sign up for MTD in 2026/27 even if they believe they will not need to use the supplementary page this year – this is due to an issue with HMRC’s systems rather than a policy decision and taxpayers in this position will not be penalised for not signing up;
• Longer deferrals - some groups are not expected to be mandated until at least April 2029, including ministers of religion, Lloyd’s members with self-employment or property income, and individuals claiming Married Couple’s Allowance or Blind Person’s Allowance. Again, this will apply automatically where any of these are included in the 2024/25 return, but an application will be required otherwise; and
• Permanent exemptions (unless circumstances change) – individuals who are digitally excluded can claim exemption where it is not reasonable or practical to use digital tools because of age, disability or remote location, or where there is a religious objection to using computers. Individuals who already have a digital exclusion exemption for MTD VAT are likely to qualify for Income Tax too but will need to contact HMRC. Certain individuals are treated as permanently outside MTD including trustees, personal representatives and those acting under power of attorney, Lloyds members submitting returns for an underwriting business and individuals filing on behalf of a non-resident company. There is also a tax-year-by-tax-year exemption where the taxpayer does not have a National Insurance number at the end of a tax year (meaning they are exempt for the following year). 

What taxpayers need to do once they are in MTD

Once within MTD for Income Tax, taxpayers must use MTD-compatible software to keep business records in a digital form and to send information to HMRC. During the year they must file quarterly updates summarising income and expenditure for each in-scope business (trade and/or property). After the tax year ends they must submit an end of year Tax Return declaration where taxable profits are confirmed and any relevant adjustments are made. Details of non-business income and relief claims are also included before finalising.

It is possible to choose quarterly periods that follow either the tax year (6 April starts) or the calendar year (quarters starting 1 April). Quarterly update deadlines are 7 August, 7 November, 7 February and 7 May in both cases. For example, the first update is due by 7 August 2026 if the first quarter ends on 5 July 2026 (tax-year quarters) or 30 June 2026 (calendar quarters).

The end of year Tax Return declaration is due by 31 January after the tax year (the same deadline as Self Assessment). At that point, the annual income tax position is crystallised and the Self Assessment return is effectively replaced for taxpayers within MTD for Income Tax.

When does MTD start for a particular business?

For an existing business that was trading/letting on 6 April 2026, mandation is determined by the earlier tax return (as described above) and will usually apply from 6 April 2026 unless an exemption or deferral applies. New businesses are generally brought in later: in broad terms, from 6 April of the third tax year in which the business exists. If the taxpayer opts for calendar-year quarters, the practical start date aligns to 1 April rather than 6 April.

Penalties: a different framework from Self Assessment

Once in MTD, late filing and late payment fall under the MTD penalty rules (already used for VAT) rather than the traditional Self Assessment regime. Late submissions operate on a points system, however, the Government has confirmed that late submission penalties will not be applied for the 2026/27 tax year. Late payment penalties apply where tax remains unpaid 15 days after the due date, extended to 30 days for the taxpayer’s first year within the new penalty regime.

If you have any questions on MTD for Income Tax please speak to the authors or your usual KPMG in the UK contact.

For further information please contact:

• Jamie Richards
• Simon Johnson