What is the latest with Making Tax Digital for Income Tax? (June 2025)

Making Tax Digital (MTD) for Income Tax is an initiative by HMRC aimed at revolutionising the way taxpayers, including sole traders and landlords, handle their financial records and submissions. With April 2026 set as the official launch date for MTD for Income Tax, it is critical for accountants to understand the latest updates and implications to guide their clients effectively. 

This blog will explore the most recent developments in MTD for Income Tax as of June 2025, who it impacts, upcoming deadlines, and what accountants can do now to prepare. 

What is Making Tax Digital for Income Tax? 

MTD for Income Tax is part of HMRC’s broader strategy to modernise the UK tax system. It aims to streamline the process by requiring businesses and individuals to maintain digital records and submit quarterly updates to HMRC through MTD-compliant software. 

The goal is to reduce errors, make record-keeping more efficient, and enable taxpayers to stay on top of their tax obligations throughout the year. 

Key components of MTD for Income Tax: 

• Digital record-keeping: Taxpayers will be required to keep digital records of their income and expenses. 
• Quarterly updates: Regular submissions that provide a summary of business activity to HMRC. 
• End-of-year reporting: A final declaration after the submission of quarterly updates for necessary adjustments, such as accounting or tax reliefs. 

*Looking for a reliable source on MTD updates? Visit Bright’s MTD Hub. 

Who does MTD for Income Tax apply to? 

The rollout of MTD for Income Tax will be phased to ensure a smooth transition: 

• From April 2026, it applies to sole traders and landlords with a qualifying income above £50,000 
• From April 2027, the threshold lowers to those with qualifying income above £30,000 

Qualifying income includes gross income from sources like self-employment and property, measured before any tax allowances or expenses are deducted. 

Exemptions are available for certain groups, including those who cannot engage digitally due to age, disability, or location, as well as trustees and businesses run by religious societies opposed to electronic communications. 

Latest updates on MTD for Income Tax 

1. April 2026 launch confirmation

After multiple delays, HMRC has confirmed that MTD for Income Tax will go live on 6 April 2026 for sole traders and landlords with a qualifying income above £50,000. The phased approach reflects lessons learned from MTD for VAT, ensuring businesses have adequate time to prepare. 

2. Government’s testing programme

Eligible taxpayers can now sign up for HMRC’s voluntary testing programme. This provides an opportunity to familiarise themselves with the new system and access support before MTD becomes mandatory. 

3. Quarterly reporting will spread workload

One of the benefits of MTD is its real-time approach to tax submissions. Instead of a single annual tax return, taxpayers will now submit four quarterly updates. These updates are less detailed than traditional end-of-year tax returns, reducing last-minute rushes and spreading the workload throughout the year. 

4. Penalties and points system

Under the new system, taxpayers won’t face an immediate financial penalty for missing a filing obligation. Instead, a points-based approach has been introduced: each missed submission will add points to the taxpayer’s record, and only after reaching a specified threshold will a monetary penalty be imposed.  

This points-based penalty system aims to be fair and balanced, targeting habitual non-compliance rather than occasional lapses. It is specifically tailored for taxes that require regular submissions. 

5. Digital software is essential

Taxpayers must use MTD-compatible software to maintain records and submit updates.  Accountants should review software choices and determine which options best fit their clients’ needs. 

How accountants can prepare for MTD 

With the April 2026 deadline fast approaching, accountants play a critical role in ensuring their clients are ready for MTD. Here’s how to prepare: 

Step 1. Identify affected clients 

Review your client base to identify sole traders and landlords with qualifying income above £50,000. Start discussions with these clients about what MTD involves and what they’ll need to do. 

Step 2. Guide clients toward digital solutions 

Help clients transition their record-keeping to MTD-compatible software. This includes providing training on how to use the software or collaborating with bookkeeping services. 

Step 3. Plan for quarterly submissions 

Educate clients on the new system of quarterly updates. Introduce internal processes to review and submit updates on their behalf to ensure compliance. Practice management software will be essential in managing the extra workload and client deadlines (check out BrightManager as an option). 

Step 4. Stay up-to-date with HMRC guidance 

HMRC continues to release updates and clarifications about MTD. Sign up for newsletters, attend webinars, and keep an eye on official resources to stay informed. 

Help your clients transition with confidence 

MTD for Income Tax represents the most significant shift in tax compliance in decades, and the countdown to April 2026 has begun. With proper preparation, accountants can turn this challenge into an opportunity to enhance client trust and position themselves as proactive advisors. 

Get prepared for Making Tax Digital for Income Tax (MTD for IT) by accessing Bright’s comprehensive resource pack. Packed with practical tools and time-saving materials, it’s designed to support you in informing and onboarding your clients with ease and efficiency.