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The Next Step in Digital Tax: What MTD for Income Tax Means

New Filing Requirements for Sole Traders and Landlords 

Making Tax Digital for Income Tax (MTD IT) is the next major phase of HMRC’s digital tax programme and represents a fundamental change in how sole traders and landlords manage and submit their tax information. 

Under MTD IT, affected taxpayers will need to move away from paper records and traditional annual Self Assessment filing, and instead adopt MTD-compatible Income Tax software to manage ongoing compliance. 

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When Does MTD for Income Tax Apply?

MTD for Income Tax will be introduced in stages, based on income thresholds: 

  • From April 2026 
    Mandatory for sole traders and landlords with qualifying income over £50,000 
  • From April 2027 
    Mandatory for those earning over £30,000 
  • From April 2028 
    Expected to apply to individuals with income over £20,000 

These thresholds relate to gross qualifying income, not profit. 

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Who Needs to Follow MTD for Income Tax?

  • Self-employed individuals
  • Landlords with qualifying income
  • Accountants managing MTD IT clients

Capium ensures full compliance with HMRC requirements while keeping workflows simple and manageable. 

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Key MTD IT Requirements

Under MTD for Income Tax, sole traders and landlords will be required to: 

  • Maintain digital records

    Keep income and expense records digitally using HMRC-recognised MTD IT software

  • Submit quarterly updates to HMRC

    Replace the traditional annual-only approach with four quarterly submissions per tax year

  • Complete an End of Period Statement (EOPS)

    Finalise figures for each income source after the tax year ends

  • Submit a Final Declaration

    Confirm all income and allowances by 31 January following the end of the tax year

MTD IT does not mean four tax bills a year: It means more regular reporting to HMRC, with tax still finalised annually. 

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What Happens to Paper Records and Manual Filing?

For individuals within the scope of MTD IT, traditional paper records and manual online Self Assessment filing will no longer be accepted by HMRC. 

Only those outside the MTD thresholds or formally exempt will be able to continue using non-digital methods. 

This makes choosing the right MTD Income Tax software essential for both accountants and their clients. 

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What Are the Risks of Non-Compliance?

Failing to comply with MTD IT requirements may result in: 

  • Late submission penalties 
  • Increased HMRC scrutiny 
  • Additional administrative burden for accountants and clients 
  • Higher long-term compliance costs 

Preparing early helps practices avoid last-minute disruption and gives clients time to transition at a manageable pace. 

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Why Early Preparation Matters

With MTD IT deadlines approaching, accountants need software that supports:

  • Digital record keeping
  • Quarterly submissions
  • Multiple income sources per client
  • Clear workflows for review and submission
  • Scalable MTD services for different client types

Capium’s MTD solutions are designed to help accountants meet MTD for Income Tax requirements confidently, while supporting clients at every stage of their digital journey. 

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Preparing for MTD Income Tax: Start Now

Successful MTD IT adoption starts early. Capium helps accountants prepare by: 

  • Identifying affected clients 
  • Segmenting clients by digital readiness 
  • Testing digital links 
  • Educating clients with confidence 
  • Choosing the most suitable Capium pathway for each client 

With Capium, firms can manage MTD IT efficiently while turning compliance into a long-term advisory opportunity.  

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MTD IT Key Software Features

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Mobile receipt capture & document uploads

Capture receipts and upload supporting documents instantly using the Capium mobile app or web platform. Keep digital records up to date throughout the year and reduce last-minute admin for both accountants and clients. 

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Bank feeds & automated categorisation

Automatically import transactions from connected bank accounts and categorise income and expenses using built-in rules. Maintain accurate digital records that meet HMRC’s MTD IT requirements with minimal manual input. 

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MTD-ready Self Assessment reporting

Self-employment, UK property, and foreign income reports are automatically populated from live digital records, ensuring accurate preparation for MTD IT quarterly updates and final declarations — without duplicate data entry. 

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Quarterly submissions & final declaration

Submit MTD IT quarterly updates and the end-of-year final declaration directly to HMRC using fully HMRC-recognised MTD Income Tax software. Stay compliant and in control at every stage of the reporting cycle. 

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Real-time tax estimates

View up-to-date tax positions throughout the year based on live income and expense data. Help clients plan ahead, manage cash flow, and avoid unexpected tax liabilities at year end. 

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Secure accountant–client collaboration

Work from a single shared data set with full visibility for both accountants and clients. Improve accuracy, reduce errors, and streamline communication across MTD IT workflows

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Client approval & e-signing

Quarterly approval process and end of year e-signing:

Request and capture client approval digitally before submissions are sent to HMRC. Built-in approval flow and e-signing ensures a clear audit trail and reduces delays caused by manual sign-off processes. 

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Automated quarterly submissions workflow

Manage MTD IT quarterly submissions efficiently with structured workflows, deadline tracking, and submission status visibility — helping practices stay organised as MTD Income Tax scales.

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MTD IT Solutions

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MTD for VAT

Submit VAT returns directly to HMRC with automated 9-box calculations and spreadsheet bridging. 

MTD for Income Tax (IT)

Manage quarterly updates, digital record keeping and year-end submissions for self-employed individuals and landlords.

MTD for Clients (Businesses)

Capture receipts, track income and expenses, and stay compliant using Capium 365.

MTD for Accountants

Control all client VAT and Income Tax obligations from a single dashboard with full workflow visibility.

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