Making Tax Digital for Income Tax confirmed for 2026 - here’s how to get ready

Millions of business owners and landlords will change the way they report their earnings to HMRC over the next few years, as the government confirmed their commitment to Making Tax Digital for Income Tax (MTD IT) during the Autumn Budget. All self-employed individuals and landlords with incomes of over £20,000 will now be included in MTD IT by the end of this parliament.

MTD IT - also known as MTD for Income Tax Self Assessment (MTD for ITSA) - promises to “transform tax administration so that it is easier for taxpayers to get their tax right”. It is part of the UK’s strategy to have “one of the most digitally advanced tax administrations in the world”.

When does Making Tax Digital for Income Tax start?

MTD IT will replace the current Self Assessment system for business owners and landlords in stages, depending on their incomes (not profit):

• From April 2026 (tax year 2026/27) - all self-employed individuals and landlords with income over £50,000
• From April 2027 (tax year 2027/28) - all self-employed individuals and landlords with income over £30,000
• By the end of this parliament (2029 at the latest) - all self-employed individuals and landlords with income over £20,000

The pledge to include businesses with an income of more than £20,000 represents a new addition to previously announced plans. MTD IT is the second stage of the Making Tax Digital plan, following on from the introduction of Making Tax Digital for VAT, which has applied to all VAT-registered businesses since April 2022.

The first group affected by MTD IT - for whom the new rules will apply in just 18 months - comprises an estimated 795,000 businesses according to HMRC figures.

There was no update in the Budget about when Partnerships will be required to join, nor were there further details on MTD for Corporation Tax for companies.

What will MTD IT mean for self-employed individuals and landlords?

To comply with MTD IT self-employed individuals and landlords will have to take these actions:

• Keep records of their business income and expenses in a digital format.
• For each type of revenue (self-employed business or property), send quarterly updates of business income and expenses to HMRC.
• Finalise business income by submitting a final declaration.
• Pay the tax you owe by 31st January of the following tax year (so no change from the current Self Assessment process in this area).

For more details on the new rules and deadlines, see our guide to Making Tax Digital for Income Tax.

FreeAgent can help businesses prepare for Making Tax Digital

Under MTD IT, businesses will need to keep digital records of all business income and expenses, including all income from self-employment or property. It’s a good idea to start doing this as soon as possible.

Businesses can keep digital records using accounting software such as FreeAgent. Bank transactions can be pulled directly into FreeAgent by setting up a bank feed, and the software offers powerful tools to manage invoices, expenses, projects and more. Tax returns can be submitted directly to HMRC within FreeAgent.

Alternatively, businesses and individuals can work with an accountant or bookkeeper to ensure they are MTD-compliant. Our directory can help identify practices in your area.

MTD IT-compatible

HMRC has started ‘private beta’ testing its systems ahead of the rules coming into force in 2026. FreeAgent is involved in this programme and has already been included on HMRC’s list of MTD IT-compatible software.

We are working initially with a number of our accountancy partners, with a view to expanding this next year. If you are a FreeAgent Practice Partner and would like to get involved in testing for the 2025/26 tax year, please speak to your account manager.

Once we are ready to open up the beta programme to individuals who file their own tax returns, we will let our customers know.

What about landlords?

FreeAgent for Landlords is a dedicated version of our award-winning software built to simplify managing property finances. When MTD for Income Tax comes into effect, you’ll be able to use FreeAgent for Landlords to make the required tax submissions directly to HMRC.

Find out how FreeAgent can help you

If you want to see how FreeAgent’s powerful automation features can help get your accounts in order for digital filing with minimal hassle, you can take a 30-day free trial. NatWest, Royal Bank of Scotland, Ulster Bank or Mettle business bank account holders can get FreeAgent for free for as long as they retain their account (optional add-ons may be chargeable).

If you’re an accountant or bookkeeper, get in touch to discuss how we can help you prepare your practice ahead of the deadline.