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TL;DR

• MTD for Income Tax starts April 2026 for income over £50k, dropping to £30k in 2027 and £20k in 2028. • Some groups are deferred or exempt until at least 2029. • HMRC testing and digital reforms are already underway.

Making Tax Digital (MTD) 2025 Update – New Deadlines, Software & Exemptions

Making Tax Digital (MTD) continues to be central to HMRC’s plan to modernise the UK tax system. Following multiple delays and phased rollouts, 2025 is a key year as HMRC finalises the timetable, expands public testing, and sets out clearer rules on exemptions and compliance.

What’s New in 2025

1. Phased roll-out timeline

  • April 2026: mandatory for sole traders and landlords with income over £50 k 
  • April 2027: threshold reduces to £30 k 
  • April 2028: threshold drops to £20 k; full coverage expected 

2. Exemptions & deferrals

Certain groups are deferred until at least 2029; others permanently exempt 

3. Software & digital process enhancements

  • MTD requires digital record‑keeping via HMRC‑approved software. Excel or paper no longer acceptable 
  • MTD software will be default route for Final Declaration (digital tax return) 
  • Annual Self Assessment return replaced by quarterly updates and digital declaration 

4. Public testing phase active

Launched April 2025. Agents can enrol clients to trial systems ahead of 2026 mandate 

5. HMRC Transformation Roadmap

Digital improvements in progress include:

  • Clearer digital notifications for tax‑code changes
  • Enhanced SA registration, appeals, penalty processes
  • Long‑term goal: 90 % digital customer interactions by 2030 

6. Penalty & compliance reforms

Draft legislation released July 2025 covering penalty point resets, exemptions, mandatory software use from thresholds 

FAQs
Who needs to use MTD for Income Tax and when?
What are qualifying income and MTD tasks?
Are there exemptions?
Can I test MTD before the deadline?
What else is HMRC doing?

Important Info:

While efforts have been made to provide accurate information as of the post date, our posts should not be considered as financial advice. Please always consult a professional before making decisions that could affect your financial wellbeing.

About the author

Jonathan Myers
Jonathan has worked at UWM since 1983. He specialises in helping companies make business plans, manage taxes, and increase profitability. A Xero Certified Advisor, Jonathan also enjoys helping clients increase efficiency with cloud accounting. While this might sound complicated, it often leads to savings in time and money.
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