Understanding MTD for Income Tax: A Guide for Landlords and Self-Employed Individuals

What is Making Tax Digital for Income Tax?

Making Tax Digital is a government initiative aimed at modernizing the tax system. It requires digital record-keeping and online submission of tax returns. For Income Tax, phase one targets self-employed people and landlords with gross income above £50,000. From April 2026, these taxpayers must keep digital records and submit their tax information through compatible software.

Who Needs to Follow the New Rules?

Starting with the 2024/25 tax year, anyone who is self-employed or a landlord and expects to declare more than £50,000 in gross income on their self-assessment tax return will have to comply with MTD for Income Tax from April 2026. This includes:

• Sole traders

• Partnerships with self-employed members

• Landlords with rental income exceeding the threshold

  
  

If your income is below £50,000, you are not required to follow MTD rules but may choose to do so voluntarily.

Who Can Apply for an Exemption?

HMRC recognizes that some taxpayers may face difficulties complying with MTD requirements, especially those who are digitally excluded. This includes people who:

• Do not have access to the internet or digital devices

• Have limited digital skills or confidence

• Face other barriers that make digital record-keeping impractical

  
  

If you believe you fall into one of these categories, you can apply for an exemption from MTD for Income Tax. HMRC will assess each application individually.

How to Apply for an Exemption

To apply, you or an authorized third party (such as a relative or tax agent) must contact HMRC by phone or in writing. The application should explain why you cannot comply with MTD requirements. HMRC aims to respond within 28 days with their decision.

If you are already exempt from MTD for VAT, HMRC advises contacting them again when the exemption application opens for Income Tax. This helps confirm whether your circumstances also qualify you for an Income Tax exemption.

What Happens After Applying?

HMRC will review your case carefully. Because they handle applications individually, the level of flexibility in granting exemptions is not yet clear. The goal is to support as many people as possible to manage their taxes online, but they understand some will need exemptions.

If your application is accepted, you will not have to follow MTD rules for Income Tax. If it is refused, you must prepare to comply by April 2026.

Preparing for the Future

The clock is ticking for those affected. Here are some practical steps to take now:

• Check your income to see if you meet the £50,000 threshold.

• Assess your digital skills and access to determine if you might need an exemption.

• Gather supporting information if you plan to apply for exemption.

• Contact HMRC early to avoid last-minute issues.

• Consider getting help from a tax agent or trusted relative if you struggle with digital tools.

  
  

Why This Matters

MTD aims to make tax reporting more accurate and efficient, but it can be challenging for those not comfortable with technology. The exemption process offers a way to protect vulnerable taxpayers while encouraging digital adoption where possible.

For landlords and self-employed individuals, understanding these rules now can prevent penalties and stress later. Taking action early ensures you stay compliant or secure an exemption if needed.

Conclusion: Your Next Steps

As we move closer to the implementation of MTD for Income Tax, it’s essential to stay informed. The changes may seem daunting, but you’re not alone. I encourage you to reach out for help if you need it. Whether it’s a friendly chat with a tax agent or a conversation with a knowledgeable friend, support is available.

Remember, the goal is to make tax management easier for everyone. By understanding the rules and preparing in advance, you can navigate this transition smoothly. If you have any questions or need assistance, don’t hesitate to ask. Together, we can ensure that you’re ready for the future of tax reporting.