Introduction
About Making Tax Digital for Income Tax and what to expect this year.
HMRC is introducing a new way of reporting income and expenses called Making Tax Digital for Income Tax. It is a key part of the government’s Tax Administration Strategy to transform and modernise the current tax system. For more information read HMRC’s overview of Making Tax Digital.
Under the new way of reporting, sole traders and landlords will need to:
- use software that works with Making Tax Digital for Income Tax
- keep digital records of their business income and expenses
- send quarterly updates to HMRC
- submit a tax return and pay tax due by 31 January the following year
Who will need to do it
The new way of reporting will become mandatory in phases, starting from 6 April 2026. Many people will be able to voluntarily sign up from April 2024 to help test and develop the service.
Sole traders and landlords who earn income from self-employment or property will have to sign up, unless:
- their qualifying income is £30,000 or less (before expenses or taxes are deducted)
- they’re exempt from Making Tax Digital for Income Tax
Those with an income of more than £50,000 must sign up from 6 April 2026.
Those with income of more than £30,000 must sign up from 6 April 2027.
The Government has decided to keep plans for extending Making Tax Digital for Income Tax to sole traders and landlords with income below £30,000 under review.
For detailed information about exemptions and eligibility criteria, check if you’ll need to sign up for Making Tax Digital for Income Tax.
Throughout the 2024 to 2025 tax year, HMRC wants to work with a wide range of businesses, agents and software developers. This is help us test and develop the new way of reporting income and expenses if you’re a sole trader or landlord.
The role of the tax agent is essential to developing the service. HMRC has listened to feedback from agents who want to:
- be involved in testing the service across a full financial cycle (21 months)
- understand and support HMRC’s activities and plans
By volunteering to test Making Tax Digital for Income Tax, you’ll:
- be able to influence what the service is like in future
- be ready to support clients when the service becomes mandatory
- become familiar with the software you’ll use with your clients
- get dedicated support to help you when you begin using the service
- stay up-to-date with competitors using the service, or begin using the service before them
In the 2024 to 2025 tax year, HMRC will test the new service with a limited number of volunteers.
This will enable:
- all volunteers (including agents and their clients) to test and develop the service, including its support and guidance
- software developers to test their products alongside HMRC’s service, and identify and resolve issues
HMRC will introduce functionality in phases, so that new income sources can be added and tested, or removed if they’re no longer relevant.
April to June 2024
HMRC will make sure new sole traders and landlords can sign up, and that only those who are eligible sign up.
If you have asked to receive reminders about key deadlines, we’ll check these are working properly.
July to September 2024
HMRC will:
- check if you’re able to make your quarterly update
- check your payments on account have been set up correctly
- check your payments have been received and applied to your account correctly
- carry out checks on interest you accrue if you do not make a payment
- check automated repayments work
October to December 2024
HMRC will:
- check if you’re able to make your quarterly update
- make sure you can view your payment on account for the current year — in your software or HMRC online services
- check your payment on account balance gets updated
January to March 2025
HMRC will:
- check if you’re able to make your quarterly update
- make sure you have been able to submit your tax return and pay tax due by 31 January
- check charges to your payment on account balance and that you can adjust your payment on account
- make sure we can manually adjust financial information in your record and that this transfers to your account
Further testing from April 2025 to March 2026
From 2025, most sole traders and landlords will be able to volunteer to use Making Tax Digital for Income Tax. This will allow them to get familiar with using software and keeping digital records, before it becomes mandatary from April 2026.