Making Tax Digital (MTD) – What You Need to Know
Making Tax Digital for Income Taxbecomes mandatory from 6 April 2026for many unincorporated businesses and landlords. Whether you need to comply depends on your total income from trading and property.
Start Dates and Income Thresholds
- From 6 April 2026:
You must follow MTD for ITSA if your combined trading and property income is £50,000 or more. - From 6 April 2027:
The threshold falls to £30,000. - From 6 April 2028:
It reduces further to £20,000.
Your eligibility is based on your income in the 2024/25 tax year. As this year has now ended, we can confirm if you fall within MTD and help you prepare.
What MTD for ITSA Involves
If you are within the rules, you must:
- Keep digital business records.
- Submit quarterly updatesto HMRC using MTD-compatible software.
- Submit a final declarationafter the end of the tax year to finalise your tax position.
We can advise and support you with choosing software and meeting all reporting requirements.
Unincorporated Businesses – The Tax Year Basis
From 2024/25 onwards, all unincorporated businesses must report profits on a tax-year basis, regardless of their accounting year-end.
What This Means
If your accounting date is notbetween 31 March and 5 April, you will need to:
- Apportion profits from two accounting periods
- Calculate the profit that belongs to the tax year, not just your accounting year
These figures must be reported on your 2024/25 Self Assessment tax return.
Transition Year (2023/24)
The 2023/24 tax year was the transition from the old rules to the new tax-year basis.
If your accounting year-end did not match the tax year, you may have had transition profits, which represent:
The period from the end of your 2023/24 accounting period up to 5 April 2024.
How Transition Profits Are Taxed
Unless you choose otherwise:
- They are automatically spread equally over five tax years:
2023/24 to 2027/28
You can elect to bring more (or all) of the remaining transition profits into 2024/25if this would be beneficial—for example, to use reliefs or lower tax rates.
How We Can Help
We can:
- Confirm whether you fall within MTD for ITSA based on your 2024/25 income
- Help set up digital record-keeping and compatible software
- Prepare and submit quarterly and annual submissions under MTD
- Calculate your profits using the new tax-year basis
- Advise whether accelerating transition profits into 2024/25 is tax-efficient
