Making Tax Digital for Income Tax is back on the agenda - here’s what you need to know

Nearly two years ago, the government announced a two-year delay to the introduction of Making Tax Digital for Income Tax (MTD IT), alongside major changes to the income thresholds for those affected.

While there was some uncertainty on whether the new government would continue to deliver MTD IT, the recent Budget confirmed the new rules would come into effect in April 2026, nearly two years later than originally planned. It also included the surprise announcement that MTD IT will expand to include self-employed individuals and landlords with income over £20,000. Here’s where we’re up to.

When does Making Tax Digital for Income Tax come into effect?

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

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.

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.

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

To comply with MTD IT, self-employed individuals and landlords will need to:

• 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 they owe by 31st January of the following tax year

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

How to prepare your clients ahead of the MTD deadline

The new rules come into effect in less than 18 months, so MTD IT will be here sooner than you might think. If your practice hasn’t already started to prepare for the change, it’s time to start.

Begin by segmenting your client base to gain a better understanding of their different needs. Then, you can start thinking about how to share relevant information with them in an effective way. Creating a communications plan will help you identify the key messages you want to share and how best to communicate those messages so they’re left feeling confident about what’s next.

Finally, get them set up on accounting software. Some of your clients may have never used digital tools before, so it’s important to acclimatise them well in advance of their first submission. As a FreeAgent Partner, you have access to a host of handy educational resources to help your clients get to know our software, and with a bit of encouragement, they may feel more comfortable taking on some admin and bookkeeping tasks.

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.

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 with your clients to make the required tax submissions directly to HMRC.

How much does FreeAgent cost?

As part of our Partner Programme, you have access to discounted pricing. Plus, FreeAgent is free for clients who have a NatWest, Royal Bank of Scotland or Ulster Bank business current account (for as long as they retain the account), or a Mettle account (if they mark Mettle as their primary account in FreeAgent). Optional add-ons may be chargeable.