As we approach the end of the second quarter (Q2) of Making Tax Digital (MTD) reporting, we are looking ahead to the next major milestone. Our October Spotlight focuses on what MTD is, who it affects, and what you can do now to prepare.
What is Making Tax Digital?
In April 2026, MTD, or ‘making tax digital’ was introduced for sole traders and landlords with qualifying income exceeding £50,000.
MTD is HMRC’s system for reporting self-employment and property income digitally. Instead of maintaining paper records and submitting a single annual tax return, affected taxpayers must keep digital records of their income and expenses and submit quarterly updates to HMRC. An end-of-year ‘finalisation’ process is also required, equivalent to a yearly tax return.
The key quarterly reporting deadlines are:
| Q1 | Q2 | Q3 | Q4 | ‘Finalisation’ | |
| Reporting Deadline | 7th August | 7th November | 7th February | 7th May | 31st January |
It is important to note that, whilst MTD changes how information is reported to HMRC, it should not change the amount of tax you pay.
Changes in April 2027:
From April 2027, the threshold for being included in MTD is decreasing to £30,000 p/a of qualifying income.
Qualifying income is your total turnover from self-employment and property within the relevant year, added together, before any expenses are deducted. If property is shared, only your share of the income is considered. Additionally, property income also includes that from foreign properties for UK residents.
How Can You Prepare?
Now is a good time to review your 2025/26 income, as this will determine whether you fall within the scope of MTD in future years.
Consider:
- Whether your income is likely to exceed the £30,000 threshold from April 2027.
- Whether suitable bookkeeping software is in place.
- Whether you may qualify for a digital exclusion exemption if it is unreasonable for you to comply digitally.
- How future changes to your circumstances may affect your MTD obligations.
It is also worth noting that the MTD threshold is scheduled to reduce further to £20,000 from April 2028, bringing many more taxpayers into the regime.
Need Help?
If you think MTD may affect you, now is the ideal time to start planning. Read our full October Spotlight which takes a closer look at the practical implications and the software options available.
