As part of her Spring Statement given on 26 March, the Chancellor Rachel Reeves made the announcement that the Making Tax Digital for Income Tax (MTD for IT) scheme will be extended to include smaller businesses from 2028.

In the Budget last October, the plans were unveiled to include sole traders and landlords with income over £20,000 before the end of this Parliament.  However the Spring Statement has now confirmed this will come into effect from 6 April 2028.

What is MTD for Income Tax (MTD for IT)?

MTD for IT will require self-employed individuals and landlords with income over a certain limit to keep digital records and submit quarterly tax updates to HMRC using compatible software.  The process will significantly change how businesses,
self-employed individuals and landlords engage with HMRC, as they will need to register, file, pay and update their details through an online tax account.

Who will it affect and when?

With the extension of the plan now confirmed, these are the deadlines for the introduction of MTD for IT and who will be affected:

• 6 April 2026 for sole traders and landlords with income over £50,000 in the 2024/25 tax year
• 6 April 2027 for those with income over £30,000 in the 2025/26 tax year
• 6 April 2028 for those with income over £20,000 in the 2026/27 tax year.

The government has published guidance on the modernisation of the tax system, including a list of certain groups who are exempt from these rules.

MTD for IT will also affect how tax returns are submitted

It has also now been confirmed that if you are required to use MTD for IT, your end-of-year tax return must also be submitted using MTD-compatible software. It won’t be possible to use a free HMRC online service.

We are here to help you prepare for these changes.  If you have any questions, please get in touch.

Internet link: GOV.UK