HMRC updates MTD guidance on penalties and digital record-keeping.
The UK’s HM Revenue and Customs (HMRC) updated its guidance on Making Tax Digital (MTD) for income tax on 26 November 2025 as part of preparations for mandatory digital reporting from 6 April 2026. The revisions clarify penalty rules, record-keeping requirements, and qualifying sources of income.
HMRC confirmed that penalty points for late quarterly updates will be waived during the first year, although late tax returns will still attract points. Quarterly updates must be submitted before the final return, and volunteers joining mid-year will not face penalties for missed updates.
The guidance specifies the digital records that must be kept. Taxpayers must create and store records of self-employment and property income and expenses, including cases involving the trading income allowance, property allowance, Rent-a-Room Scheme, and income received through software linked to business bank accounts. Requirements for new self-employment or property income under MTD are also detailed.
A digital record is defined as a record of income or expense that is created and stored using software compatible with Making Tax Digital for Income Tax. Taxpayers or their agents must continue keeping original supporting documents or copies as required for Self Assessment. HMRC advises ensuring that all sign-up steps, including authorising software, are completed before creating digital records.
The update also clarifies which income counts towards qualifying income. This includes ceased income sources, self-assessment amendments, averaging relief, one-off UK land transactions, income from UK REITs or PAIFs, accounting periods of varying lengths, qualifying care relief, and the effect of tax residence.
