Making Tax Digital for Income Tax: Time to get ready
With the April 2026 mandation deadline fast approaching, we look at the latest position on the Making Tax Digital (MTD) for Income Tax trial and signpost the support available to help our members get ready for the change.
In recent years, there has been a high level of scepticism about Making Tax Digital (MTD) for Income Tax, following the changing timescales. The government announced in December 2022 that the legal requirement for unincorporated businesses and landlords to submit quarterly updates would be extended until April 2026 (for those with a gross income above £50,000) and April 2027 (for those with a gross income above £30,000). In today’s Budget, the government announced that MTD for Income Tax will be extended to sole traders and landlords with gross income over £20,000 by the end of this Parliament, although the exact timing will be announced at a later date.
As April 2026 approaches, it’s important to understand your client base and how MTD for Income Tax will affect both you and their business. Having conversations about respective responsibilities at an early stage will help them plan ahead. For some, this will require a change in mindset – especially for those clients who may be used to calling into their accountant’s office with a bag of receipts ahead of the 31 January tax return deadline. Some clients may seek to rely on their accountant to support them with their quarterly updates, and this will undoubtedly need to have an impact on their fees.
Supporting our members in preparing for MTD
We recently hosted Craig Ogilvie, HMRC’s MTD Director, and Lenny Barry, from its MTD programme support team, at our Making Tax Digital for Income Tax: Get your practice ready webinar to explore the issues to consider when preparing your practice for April 2026.
As part of our dialogue with HMRC on MTD, we worked closely on problem issues, such as the importance of being able to authorise multiple agents – this means that it should be possible to have both main and secondary agents to avoid issues with authorisation being revoked. Being clear about who is responsible for what will be important.
Having compatible software will also be essential – HMRC updates its list on a regular basis. For some taxpayers, bridging software may be an appropriate option. At our recent webinar, HMRC also confirmed it is having dialogue with developers regarding the provision of free software which may be suitable for smaller self-employed taxpayers and landlords.
Additional HMRC resources
HMRC has also recently updated its Use Making Tax Digital for Income Tax guidance to provide further information and clarification about how MTD for Income Tax will apply in practice. This includes additional information about how to sign up and what you need to do after you have signed up for MTD for Income Tax.
If the business would like to submit quarterly updates on a calendar quarter basis (as opposed to tax quarters ending on the 5th of July, October, January and April), it is necessary to make a calendar quarter election before the first submission. The new HMRC guidance gives more details about how to do this.
HMRC has also launched a new interactive tool: Check if you need to use Making Tax Digital for Income Tax as well as further guidance on how to work out your qualifying income for MTD for Income Tax.
Volunteering for the HMRC trial
In April, HMRC launched the private beta phase of the MTD for Income Tax trial. This new phase enables a larger (but still restricted) pool of self-employed taxpayers and landlords to test HMRC’s systems, as well as their own readiness. The testing will expand to a wider range of taxpayers in the public beta phase from April 2025.
While we recognise our members are dealing with the challenges of basis period reform and its impact on their clients, we encourage you to register some of your clients for the private beta. Doing so will allow your practice to properly prepare and test the compatibility of your own systems (and those of your clients) ahead of implementation. If every tax agent volunteered to put a handful of clients into the trial, this would give HMRC a broad spectrum of self-employed taxpayers and landlords to ensure thorough testing during the period where a more lenient penalty system is in place.
Taking part in the private beta will also give you access to HMRC’s dedicated MTD support team, which will be able to provide the taxpayers involved in the trial with full self-assessment support, as well as guidance on MTD matters. This support will, however, only be available to taxpayers who register in the 2024/25 tax year.
Only self-employed taxpayers and landlords who use compatible software can take part in this phase, with more software providers expected to become compatible in the coming months. Following this, the trial will enter the public beta phase, so that full testing can take place ahead of MTD mandation in April 2026.
Further HMRC event for agents
Following the success of the in-person MTD for Income Tax event at the HMRC Glasgow office in September, a further event will be held in the HMRC Croydon Regional Centre on Thursday 5 December 2024. The event is specifically for agents and software developers with clients who will need to use MTD for Income Tax. At the event, you will find out more about the testing phase (including the extra support on offer), have access to hands-on support to sign up to the trial and be able to ask HMRC your MTD-related questions.
Craig Ogilvie and Lenny Barry (who presented at our recent webinar) will be joining Rebecca Benneyworth (Chartered Accountant and leading tax expert) for the event being held at 1 Ruskin Square, Croydon, CR0 2WF between 11am and 3 pm on Thursday 5 December.
This event has limited spaces so if you are interested and want to attend, please email mailboxmakingtaxdigital@hmrc.gov.uk no later than 29 November 2024 to secure you space. By emailing HMRC, you are agreeing to be contacted by HMRC before, during and after this event.
As this event is not hosted by ICAS, any queries you may have relating to this event, or the terms and conditions should be directed to the event organisers directly.
Let us know your views
We also welcome your views, which help inform our work on consultations or other tax-related matters. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members.
Please email tax@icas.com to share your insights and feedback.
