Making Tax Digital for Income Tax (MTD for IT): What You Need to Know
MTD for Income Tax is coming – starting 6 April 2026, HMRC will require certain individuals to comply with new digital tax reporting rules. Here’s a breakdown of the key facts for self-employed individuals and landlords.
Who Is Affected and When?
- From April 2026: Individuals with qualifying income over £50,000.
- From April 2027: Income over £30,000.
- From April 2028: Income over £20,000.
Qualifying income includes gross income from self-employment and property, before expenses. VAT-inclusive figures should be avoided when calculating this total.
Key MTD for IT Requirements
- Keep digital records using MTD-compatible software.
- Submit quarterly updates of income and expenses.
- Annual end-of-year submission still required for other income (e.g., dividends, employment).
MTD FAQs
- Quarterly payments? Not yet. Payment dates remain 31 January and 31 July.
- Low volume of transactions? Still mandated if your income exceeds thresholds.
- Joint property owners and those under the £90,000 turnover threshold may benefit from easements.
- Already VAT-registered? You may want to align your VAT quarters with your MTD reporting dates for simplicity.
- Penalties? Yes. Non-compliance can trigger penalties up to £3,000 per quarter for not keeping digital records.
Big Changes for Non-UK Domiciled Individuals from April 2025
From 6 April 2025, HMRC is abolishing the remittance basis for non-UK domiciled residents. All UK residents will now be taxed on the arising basis.
What This Means for You
- The remittance basis of taxation ends.
- A new Foreign Income & Gains (FIG) regime applies for new arrivals: no UK tax on FIG for the first 4 years of residence (after 10 years abroad).
- Pre-April 2025 FIGs are still taxable when remitted to the UK.
Inheritance Tax (IHT) Impact
- Non-UK assets will be within the scope of UK IHT if you’ve lived in the UK for 10 out of the last 20 years.
- If you leave the UK, you’ll still be within the IHT net for up to 10 years.
Abolition of Furnished Holiday Lettings (FHL) Regime – From April 2025
The FHL regime was abolished on 6 April 2025, affecting the tax treatment of holiday letting properties.
What Changes?
- Interest relief capped at basic rate (20%).
- No capital allowances for new furnishings.
- Loss of CGT reliefs like Business Asset Disposal Relief and Gift Relief.
- Holiday letting income no longer counts as relevant UK earnings for pension purposes.
Transitional Relief Available
- Carry forward pre-2025 FHL losses.
- Existing capital allowance pools can still receive writing-down allowances.
- You may still qualify for BADR if the disposal happens within 3 years of business cessation.
If your property was previously an FHL, you may still benefit from certain reliefs—speak to us to understand your options.
VAT Insight: Are Mega Marshmallows Food or Confectionery?
A new VAT case, HMRC v Innovative Bites Ltd ([2025] EWCA Civ 293), is testing the classification of Mega Marshmallows.
Key VAT Issue
- Food is generally zero-rated, but confectionery is standard-rated.
- The Court of Appeal ruled that how food is normally eaten (e.g., toasted on skewers) is critical in determining VAT treatment.
- The case has been remitted back to the First Tier Tribunal for reconsideration.
Stay tuned for the final decision—it could affect the VAT treatment of more food products.
Tax Diary: Key Dates for May & June 2025
| Date | What’s Due |
| 1 May | Corporation Tax for year to 31/07/2024, unless quarterly instalments apply. |
| 19 May | PAYE & NIC deductions, and CIS return and tax, for month to 05/05/2025 (due 22/05 if you pay electronically). |
| 31 May | Give each employee a P60 for 2024/25. |
| 1 June | Corporation Tax for year to 31/08/2024, unless quarterly instalments apply. |
| 19 June | PAYE & NIC deductions, and CIS return and tax, for month to 05/06/2025 (due 22/06 if you pay electronically). |