Making Tax Digital for Income Tax (MTD IT) will come into effect from April 2026.

Who is affected

These changes will impact individuals and landlords with gross self-employment or property income (or the total of both) exceeding £50,000 annually, with further phases expected to cover those earning over £30,000 from April 2027 and those earning over £20,000 from April 2028.

When MTD IT starts in April 2026, the £50,000 turnover test (i.e. before expenses or taxes are deducted) will be applied to the information in the 2024/25 tax returns that are due to be filed by 31 January 2026.

What this means for you

Under MTD IT, affected taxpayers will be required to:

• Keep digital records of income and expenses (from self-employment and property)
• Submit quarterly updates to HMRC via MTD-compatible software.
• Submit a Final Declaration, details of which are still being clarified.

These changes mark a significant shift from traditional self-assessment tax for landlords and individuals, which is often done on an annual basis, to a fully digital tax system with quarterly reporting to HMRC. With MTD IT, a series of four quarterly reports must broadly equal the Final Declaration figure; failing this, we expect the incidence of HMRC investigations into non-compliant businesses to increase.

How technology can help

This of course means that we will need to analyse and report performance on a quarterly basis. To ensure a smooth transition, we strongly encourage our clients to adopt digital accounting solutions as early as possible. A digital tool can assist by allowing you to upload transactions in real time:

• Bank transactions can be sync’d using a live direct bank feed
• Sales and purchase invoices can be uploaded using one of three methods: (i) by upload to the web portal; (ii) by email to a designated email address; (iii) by camera using the mobile app.

Records can be retrieved by searching the electronic archive, meaning you do not need to retain paper records in accordance with your record keeping requirements.

How we can help

Mouktaris & Co can assist you through these changes by:

• Recommending and implementing MTD-compliant software tailored to your needs.
• Providing training and support to help you navigate the new system.
• Offering ongoing assistance with digital record-keeping and quarterly submissions.

By adopting suitable technology now, you can ensure compliance ahead of the deadline while benefiting from more streamlined financial management.

Bank accounts

As bookkeeping may be done based on bank transactions, we would strongly recommend that a designated bank account is used for each business, whether property or rental. This means that a landlord operating various rental businesses with different joint owners should operate each distinct business through a separate bank account. The format of the report to be received by HMRC has not yet been finalised, but it will be important that each bank account is used only for business matters, both to avoid time in analysing private transactions on a quarterly basis and to avoid the possibility of transactions being reported to HMRC.

Next steps

We recommend that all affected clients start preparing for MTD IT from now, well in advance of April 2026. Frequently Asked Questions regarding MTD IT are discussed by our institute the ICAEW here. To discuss your options, please get in touch with your usual advisor at Mouktaris & Co, or for further details or tax planning advice, please do not hesitate to contact us.