Making Tax Digital (MTD) is a key part of the Government’s plans to ‘digitally’ transform the UK’s tax system and, in doing so, reduce the tax gap.
Since April 2022, it has been mandatory for all VAT-registered businesses (regardless of turnover) to comply with the requirements of the MTD for VAT initiative; namely to keep digital records and file VAT returns using compatible software.
MTD for Income Tax Self-Assessment (MTD for ITSA) will be mandated from April 2026, requiring sole traders, freelancers and landlords with qualifying income over £50,000 to keep digital records, to file quarterly updates with HMRC, and to submit a final year-end declaration using compatible software.
MTD for ITSA will then be extended to include those with qualifying income exceeding £30,000 from April 2027, and those with income exceeding £20,000 from April 2028.
Beyond this, HMRC are continuing to review potential solutions for those below the £20,000 threshold.
MTD for Corporation Tax will not be implemented before April 2026 and, as it stands, there is no indication of when this phase will be mandated.