The tax system has been gradually modernising in recent years, placing greater emphasis on digital processes and accurate online record-keeping. A significant part of this shift is the introduction of Making Tax Digital for Income Tax (MTD ITSA), which becomes mandatory for certain taxpayers from April 2026.
To ensure taxpayers have enough time to prepare, HMRC will begin issuing early notification letters from November 2025. These will be sent to individuals who fall within the first group required to transition to digital reporting.
What Making Tax Digital for Income Tax Means
Although Making Tax Digital has already been introduced for VAT, extending it to Income Tax represents a significant change to the Self-Assessment system.
From April 2026, individuals within scope will no longer file a single annual Self Assessment tax return. Instead, they will be required to:
● Keep their financial records digitally.
● Submit quarterly using approved MTD-compatible software.
● Review their annual figures in the End of Period Statement.
● Complete a Final Declaration to confirm their total income for the year.
The aim is to reduce errors, improve accuracy, and give taxpayers a clearer, more up-to-date view of their financial position throughout the year.
Who Must Join MTD in April 2026
The first phase of MTD for Income Tax will apply from April 2026 to:
● Self-employed individuals earning over £50,000
● Landlords with gross rental income above £50,000
A second phase, expected in April 2027, will extend the requirement to those earning over £30,000. HMRC will communicate updated timelines as the implementation date approaches.
Individuals who are part of the first phase will start receiving a notification letter from HMRC in November 2025.
What Will the Letters Cover?
The letters are intended to provide taxpayers with early clarity, avoid confusion, and allow a reasonable time to prepare. Each letter will outline a few essential points:
1. Confirmation That MTD Applies
HMRC will confirm, based on the taxpayer’s latest Self-Assessment return, whether they fall within the group required to transition to digital reporting starting April 2026.
2. Brief Guidance on What to Prepare
The letter outlines essential steps, including selecting appropriate MTD-compatible software and maintaining digital records of income and expenses.
3. Direct Link to Official Information
A QR code will be included to direct recipients to the relevant GOV.UK guidance, ensuring taxpayers can access clear, accurate, and up-to-date information from an official source.
4. Encouragement to Seek Professional Advice
HMRC acknowledges that some individuals, particularly those with multiple income streams or rental properties, may require additional support. The letter suggests that taxpayers consult an accountant or tax adviser for further guidance if needed.
The letters are informative rather than formal or pressuring, helping taxpayers prepare at a steady, manageable pace.
Why HMRC Is Sending Letters Early
Moving to digital record-keeping and quarterly reporting marks a significant change in how many people manage their financial information. To facilitate this transition and mitigate last-minute complications, HMRC is allowing taxpayers a reasonable time to prepare.
By reaching out to individuals early, HMRC aims to:
- Provide taxpayers with time to explore suitable software options.
- Encourage gradual adjustments to bookkeeping practices.
- Avoid a rush as the April 2026 deadline approaches.
- Distribute advisory workloads more evenly among accountants.
- Help taxpayers approach this change with confidence.
How Reporting Will Change Under MTD
Quarterly Updates
Taxpayers must provide updates every three months to give HMRC and themselves a clearer and more timely view of their income and expenses throughout the year.
Digital Record-Keeping
Paper receipts and spreadsheets that are not integrated with approved software will no longer comply with standards. Records must be stored and submitted in a digital format.
End of Period Statement
At the end of the tax year, taxpayers review their figures, make necessary adjustments, and ensure everything is accurate before the final submission.
Final Declaration
This replaces the traditional Self Assessment return and verifies all taxable income for the tax year.
Benefits of Moving to Digital Tax Reporting
While the system requires more frequent updates, many taxpayers find that digital record-keeping simplifies financial management in the long run. Regularly submitting information tends to lead to fewer errors and offers a clearer picture of potential tax liabilities throughout the year.
Digital systems also help with:
- Better organisation of documents
- More accurate tracking of expenses
- Reduced pressure at the end of the year
- Improved budgeting and forecasting
For many individuals and businesses, what begins as a compliance requirement quickly evolves into a more efficient and organised method for managing financial information.
How The Infinity Group Can Support You
As HMRC begins sending out these letters, many taxpayers will start considering their next steps. At The Infinity Group, we strive to make the transition to Making Tax Digital (MTD) as easy as possible and can manage the entire process on your behalf.
Once we confirm whether MTD applies to you, we will identify the most suitable software, handle the setup, and provide guidance on day-to-day requirements as needed.
As an authorised tax agent, we can act on your behalf to take care of quarterly submissions, digital bookkeeping, Self Assessment, and your overall tax affairs. Our support is fully tailored to each client rather than being a one-size-fits-all service.
Our goal is to make your transition to MTD smooth, straightforward, and completely stress-free.