Making Tax Digital Exclusions for Low-Income Taxpayers – What You Need to Know

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is set to take a staged approach, coming into effect from April 2026 for those earning over £50,000 and from April 2027 for those earning £30,000–£50,000.

However, alongside the 2023 Autumn Statement the government announced the outcome of its MTD Small Business Review, in which it confirms that those with a self-employed income of under £30,000 won’t be brought into MTD… for now, at least! The review also outlined a few other changes the government plans to make to the MTD for ITSA system, which you can read more about via the government website.  

So what do the MTD exclusions mean for low-income taxpayers? And are there potentially any benefits in preparing for MTD early? Let’s take a look.

What is MTD?

MTD is a government initiative set up to ‘reduce the tax gap’ and ‘make it easier for individuals and businesses to get their tax right’. It involves using specific MTD-approved software to maintain digital records and submit tax updates and returns. 

MTD for VAT is already in place, with all VAT-registered businesses required to comply. MTD for ITSA applies to landlords and the self-employed and, as we’ve mentioned above, will begin from April 2026 for those earning over £50,000 and from April 2027 for those earning £30,000–£50,000.

If you’d like to find out more about MTD, head over to our website where you’ll find plenty of additional information. 

How does MTD affect low-income taxpayers?

The good news for low-income taxpayers is that it’s been confirmed MTD won’t apply to self-employed workers who earn less than £30,000. This seems a sensible choice, given that lower-income workers are less likely to reap the same benefits of MTD-software that larger scale businesses will. However, there is a ‘but’ – the government has said it will keep this decision under review, meaning there’s every possibility this could change in the future. 

As someone who earns under £30,000, would using digital bookkeeping software benefit me?

This is a very individualistic question and will depend on various factors relating to your particular circumstances. Given that the threshold could be tweaked at any point, we feel it’s important for low-income taxpayers to remain mindful of this and to plan accordingly. 

Although there are obvious costs associated with using MTD-approved software, there are also lots of potential benefits. Digital bookkeeping software is designed to make accounting easier, more accurate and much less stressful. It helps to reduce the risk of errors and it can streamline, simplify and speed up your accounting processes, all of which can save you time and money in the long run! 

To help you decide whether digital bookkeeping software would be a worthwhile investment for your business, why not get in touch with our experienced team of accountants? We’ll provide tailored recommendations and advice relating to your specific circumstances and preferences. We’re also proud to have teamed up with various leading cloud-based bookkeeping solutions and are therefore well equipped to help you navigate the world of digital bookkeeping, with free trials, training and plenty of support available. Book your free, no-obligation consultation now to find out more.