Making Tax Digital – FAQs July 2025

Once an individual is mandated to comply with the MTD for IT requirements, they will need to use compatible software to:

• Record and retain details of each individual sale and business expense
• Submit quarterly summaries of their year-to-date income and expenses to HMRC
• Make accounting and tax adjustments and claim reliefs or allowances
• Finalise their end-of-year position and submit a digital tax return

There are some easements to the above requirements, namely for retailers, those with jointly held property income and those with turnover below the £90,000 VAT threshold.

For those who are mandated to comply with the MTD for IT requirements, a new ‘points-based’ penalty regime will apply.

The quarterly updates fall on the same quarters for all mandated individuals:

Please note that if you elect to submit via calendar quarters, you will get the extra 5 days to submit.

After the fourth quarter has been submitted and is final, the year-end tax return can be completed. This is where you pull together all your other tax information, e.g. dividends, partnerships, trusts, etc. The year-end process shouldn’t be too dissimilar from the current tax return process you currently have. Your accountant will be able to finalise and submit the year-end submission on different software from that which the MTD for IT quarterly submissions have been made.

MTD for IT will commence from 6 April 2026. MTD for IT will initially apply to the self-employed and to those who receive income from property.

Please note the thresholds are based on turnover/gross income, not profits.

• Those with turnover from self-employment and/or property of over £50,000 in the 2024/25 tax year will be mandated to comply with MTD rules from 6 April 2026
• Those with turnover from self-employment and/or property of over £30,000 in the 2025/26 tax year will be mandated to comply with MTD rules from 6 April 2027
• Those with turnover from self-employment and/or property of over £20,000 in the 2026/27 tax year will be mandated to comply with MTD rules from 6 April 2028

Please note that the thresholds are based on the combined total of all your self-employed and/or property income. Depending on your circumstances there could be multiple quarterly submission obligations.

When a tax payer falls below the thresholds for three successive years an exemption can be claimed for the following year. This means your total self-employed and income property will need to fall below the £20,000 threshold for three successive years before you can leave the obligations set out under MTD IT.

If you will be mandated into MTD for IT from 6 April 2026, now is the time to consider the following:

Could you be exempt from complying?

A limited set of exemptions exists, including one for those who are ‘digitally excluded’ due to their age, disability, religion or location. In order to claim this exemption, HMRC must be satisfied that a person meets their criteria. Please speak to us if you think you might fall within this category.

What services will you require from your accountant?

There’s no getting around the fact that the requirement to submit four quarterly reports in addition to the annual tax return is going to involve more work. You may wish for your accountant to deal with all of your compliance requirements, or you may just need their help with finalising your end-of-year position. Whatever your requirements, please speak to us so we can offer a solution that works for you.

Will your existing software be compatible?

Various types of MTD-compatible software will be available, including free-of-charge options for those with the simplest tax affairs. If you currently use software to keep your own accounting records, it’s important to ensure that it will be MTD-compatible come April 2026. We can help to ensure that you have the right software at a price point that works for you.

Getting organised

Quarterly reporting may well be a brand-new concept for you, particularly if you don’t submit quarterly VAT returns. Even if your accountant will be doing your bookkeeping, you’ll need to ensure that they have access to your accounting records four times a year. If you intend to submit the quarterly reports yourself, you’ll need to regularly set aside sufficient time to make sure the reports are submitted by the deadlines.

Consider taking part in the testing programme

HMRC is running a MTD for IT testing programme throughout 2025/26. Taking part could help you get to grips with the digital record-keeping and quarterly reporting requirements, before they become mandatory. It’s possible to sign up at any time during 2025/26, and penalties for late quarterly reports will not apply. If you’d like to take part, please speak to us for more details.

HMRC’s overview of MTD for IT: https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords

Exemption from Making Tax Digital: Find out if you can get an exemption from Making Tax Digital for Income Tax – GOV.UK

Taking part in the testing programme: https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax

MTD for IT compatible software: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax