As an accountancy firm working with a broad range of clients, we’re closely following the rollout of HMRC’s Making Tax Digital (MTD) scheme. Whilst not yet applicable to all, it represents a significant shift in how taxable income is reported, and ties into HMRC’s wider programme of simplifying tax administration, with the aim of making the whole process more effective and efficient.
If you are a Foxley Kingham client – rest assured we’re on top of it. We’ll be in touch with you well in advance of any action required on your part. Meanwhile, here’s a roundup of the changes that are coming and the associated timescales.
Making Tax Digital for Income Tax
Making Tax Digital for Income Tax is a new digital system requiring those with qualifying income to keep digital records of self‑employment, property income, and expenses using an approved software. Eventually, you’ll need to use MTD for Income Tax if all of the following apply:
- You’re a sole trader or landlord who is registered for Self-Assessment;
› - You receive income from self-employment or property, or both;
› - Your qualifying income, before expenses, is more than £20,000. Note that with qualifying income over £50,000 you will need to use it from April 2026, and with qualifying income over £30,000 you will need to use MTD from April 2027.
This will radically change the long‑standing Self-Assessment model, to give increased visibility and create efficiencies for HMRC. While VAT‑registered businesses have already been using digital submissions for a few years now, the income tax element is being phased in over several years, starting in April 2026.
Making Tax Digital for Corporation Tax
In late July, HMRC’s Transformation Roadmap confirmed that Making Tax Digital for Corporation Tax would be scrapped. Instead, they’re searching for a different way forward, one that, “is suited to the varying needs of the diverse CT population”. We’ll watch closely for more information on this, as we understand it’s still HMRC’s priority to improve disclosure, efficiency, and standardisation across its systems and processes.
Timescales
So, if you currently file a self-assessment tax return, when will these changes affect you? The answer depends on your qualifying income, within a single tax year:
- If your qualifying income is over £50,000 for tax year 24/25, you will need to use it from 6 April 2026.
› - If your qualifying income is over £30,000 for tax year 25/26, you will need to use it from 6 April 2027.
› - If your qualifying income is over £20,000 for tax year 26/27, the government has set out plans for you to use it from April 2028, with various exemptions available. We expect these plans to be confirmed in April 2026.
› - Business partnerships will also need to use Making Tax Digital for Income Tax in the future but the timeline for this hasn’t been suggested or confirmed at this point.
HMRC will review your self-assessment tax return and write to you when you are required to move over to the MTD scheme.
Preparing for the transition
To help you prepare for the transition, there are two simple steps you can take now:
- Work out qualifying income
Examine your most recent self-assessment tax returns to calculate the value of qualifying income. With that number in mind, you’ll be able to determine which mandatory compliance date applies to you. If it’s a complex task calculating that amount (if you have properties abroad, for example) get in touch with our team – we can absolutely help.
- Identify compatible software
To comply with Making Tax Digital, you must use software that is recognised by HMRC. Each of these software programmes will be able to complete similar tasks like creating digital records, allowing corrections, sending updates, and filing returns. But there may be certain options that are better suited to your needs and more easily compatible with your existing accountancy procedures. Speak to your Foxley Kingham Account Manager if you’re at all unsure, we use leading platform Xero, and can assist with its wider implementation into your business.
When the time comes to make the change, not only do you need to sign up to HMRC’s service before the compliance date, but also any agents or accountants who assist you with your return. Once authorised, your agents will be able to act and submit on your behalf, as they would do for your tax return using Self-Assessment.
For your peace of mind
Making Tax Digital has been a movable feast for the best part of ten years now, with the initial intention being that it would be fully implemented by 2020. Whilst there’s been a lot of change to compliance dates and thresholds, there’s no doubt that digitising tax submissions for individuals and businesses is HMRC’s ultimate goal.
Know that we’re keeping abreast of all developments related to MTD and will be in touch with guidance that’s tailored to your circumstances well in advance of any required action. Of course, if you have any immediate concerns or questions before that point, get in touch with your dedicated member of our team or join our free ‘Making Tax Digital Phone In Session’ on Thursday, 18th September, from 2pm – 4pm. The number to call is 01582 540800.