Making Tax Digital (MTD): What TaxNex Ltd Clients Need to Know Before It Launches Next Year
- TaxNex
- 59 minutes ago
- 5 min read
Published by TaxNex Ltd — December 2025
The UK’s ongoing digital transformation of tax reporting reaches a major milestone next year with the phased introduction of Making Tax Digital for Income Tax (MTD for ITSA).
If you are a sole trader, landlord, or have mixed self-employment and property income, this change will affect how you keep records and report income to HMRC. Now is the right time to prepare.
In this guide, we explain what’s changing, who is affected, when it starts, and how TaxNex Ltd can help you transition smoothly.
What Is Making Tax Digital for Income Tax (MTD for ITSA)?
MTD for Income Tax requires affected individuals to:
Keep digital records of income and allowable expenses
Submit quarterly updates to HMRC using compatible software
Complete an end-of-year finalisation, replacing the traditional once-a-year Self Assessment workflow (but not abolishing Self Assessment itself)
The change is designed to improve accuracy and give HMRC a more real-time view of taxable income.
When Does MTD for Income Tax Start?
MTD for ITSA will be introduced in phases:
From 6 April 2026Individuals with qualifying income over £50,000 (combined self-employment and property income)
From 6 April 2027Individuals with qualifying income over £30,000
From 6 April 2028Individuals with qualifying income over £20,000
HMRC will determine whether you must join based on income reported in the relevant prior tax year.For example, your 2024/25 tax return will be used to assess whether you are required to comply from April 2026.
Who Is Affected
MTD for Income Tax applies to individuals who receive income from:
Self-employment
UK property (including landlords)
A mix of employment income and self-employment or property income
It does not currently apply to:
Individuals whose income is solely through PAYE
Limited companies (company MTD remains separate)
If your qualifying income exceeds the thresholds, you or your agent must use MTD-compatible software to maintain records and submit updates to HMRC.
Exemptions
HMRC provides limited exemptions, for example where digital access is not reasonably practicable due to age, disability, or religious reasons. These are not automatic, and an application process applies.
What This Means in Practice
1. Digital Records Are Mandatory
Keeping records digitally means more than sending figures online once a year. Income and expenses must be recorded in software that can connect directly to HMRC. Standalone spreadsheets that do not link to MTD software will not meet the requirements.
2. Quarterly Updates Replace Annual-Only Reporting
Instead of a single annual return, you will submit quarterly summary updates during the tax year, followed by a final declaration after year end. This changes the rhythm of bookkeeping and tax administration.
3. Software or Agent Support Is Essential
You can manage this yourself using approved MTD software, or appoint an agent like TaxNex Ltd to handle digital records, quarterly submissions and finalisation on your behalf.
The Risks of Leaving Preparation Too Late
Failing to prepare in time can result in:
Rushed software setup
Poor-quality bookkeeping data
Missed deadlines
Increased costs for corrective work
Potential HMRC compliance action over time
HMRC has published clear timelines. Delaying preparation increases risk without any upside.
A Practical 6-Step Preparation Checklist (TaxNex Recommendation)
Confirm your qualifying income to establish which phase applies to you
Choose MTD-compatible software or confirm your current system meets requirements
Move to monthly or quarterly bookkeeping to ensure clean, timely data
Sign up to MTD early or authorise your agent in advance
Assess exemption eligibility if digital access may be an issue
Run a dry-run quarter to practice submissions and reconciliations before go-live
How TaxNex Ltd Can Help
TaxNex Ltd has supported clients through MTD for VAT and earlier HMRC digital pilots. Our approach to MTD for Income Tax is practical and low-stress.
We offer:
Qualifying income reviews to confirm your MTD start date
Software selection and setup, tailored to your business or rental portfolio
Quarterly bookkeeping and submissions, including year-end finalisation
Exemption support, where appropriate
We also offer a free MTD readiness review — a short, structured health check that identifies gaps and provides a clear action plan.
Frequently Asked Questions (FAQs)
What is Making Tax Digital for Income Tax (MTD for ITSA)?
Making Tax Digital for Income Tax is an HMRC initiative that requires self-employed individuals and landlords to keep digital records and submit quarterly updates using approved accounting software, followed by an end-of-year declaration.
Who needs to comply with MTD for Income Tax?
MTD for Income Tax applies to individuals with self-employment and/or property income above HMRC’s thresholds. It currently does not apply to people whose income is only through PAYE or to limited companies.
When does MTD for Income Tax start?
MTD for Income Tax will be introduced in phases:
From April 2026 for income over £50,000
From April 2027 for income over £30,000
From April 2028 for income over £20,000
HMRC will use income from earlier tax years to determine when you must join.
Will Self Assessment still exist under MTD?
Yes. Self Assessment will still exist, but instead of a single annual submission, taxpayers must send quarterly updates during the year and complete a final declaration after the tax year ends.
Do I need special software for MTD for Income Tax?
Yes. You must use MTD-compatible software to keep digital records and submit updates to HMRC. Standard spreadsheets on their own will not meet HMRC’s requirements unless connected via bridging software.
Can I ask my accountant to handle MTD submissions for me?
Yes. You can appoint an agent, such as TaxNex Ltd, to manage digital record-keeping, quarterly updates, and year-end submissions on your behalf.
Are there exemptions from MTD for Income Tax?
Yes, but exemptions are limited. HMRC may grant exemptions for reasons such as age, disability, or lack of reasonable digital access. Applications must be made and approved by HMRC.
How can TaxNex Ltd help with MTD preparation?
TaxNex Ltd helps clients determine when MTD applies, select suitable software, manage quarterly submissions, and complete final declarations. We also offer readiness reviews and ongoing support.
Final Thoughts
Making Tax Digital for Income Tax is more than a technical change. It reshapes how tax information is recorded, reviewed and reported throughout the year.
With early, structured preparation, many businesses and landlords will benefit from better visibility over profits and liabilities. Without preparation, the transition can be disruptive.
At TaxNex Ltd, we believe early planning always beats last-minute pressure.If you’d like support with income assessment, software selection, or a managed MTD service, get in touch with your TaxNex advisor to arrange a readiness review.
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