Making Tax Digital for UK Income Tax – Deferral to 2027 for non-UK residents

There is a significant change in how the UK tax self-assessment system operates, from April 2026. This is due to the introduction of Making Tax Digital for Income Tax (MTD IT).

There has been some uncertainty regarding how this regime change will affect non-UK residents with UK rental income and/or UK self-employment income.

Details recently published by HMRC confirm that non-UK residents who would otherwise be required to join MTD IT in April 2026 may be entitled to a one-year deferral. This is good news.

MTD IT in brief
MTD IT will affect individuals with gross rental income and/or self-employment income (‘qualifying income’) over a relevant MTD IT threshold, measured at different mandation dates.

Those with annual qualifying income of more than £50,000 are required to comply with MTD IT from April 2026 (the first mandation date).
From April 2027, MTD IT expands to those with annual qualifying income over £30,000.

From April 2028, MTD IT expands again to those with annual qualifying income over £20,000.

These thresholds are assessed against the gross qualifying income reported on the individual’s most recent annual UK self-assessment tax return filed prior to the relevant mandation date (assuming all returns are filed on time).

Therefore, 2024/2025 UK self-assessment tax returns were due to be submitted to HMRC by 31 January 2026. If an individual’s 2024/2025 UK self-assessment tax return reported gross qualifying income of more than £50,000, they are within the scope of MTD IT from April 2026.

When MTD IT applies, there is a requirement to:

• keep digital record records of qualifying income
• submit quarterly updates to HMRC, using MTD compatible software, and
• undertake year-end tax reporting.

Currently for such individuals, only the year-end tax reporting is required, via annual UK self-assessment tax return.

How does MTD IT apply to non-UK residents?
For non-UK residents, this regime can apply if the individual rents out UK property and/or carries out self-employment in the UK, and such gross UK source income exceeds the above MTD IT thresholds. For the avoidance of doubt, this includes those non-UK residents who are registered as non-resident landlords with HMRC.

Many non-UK residents renting out UK property, own this property jointly. For jointly owned property, only the individual’s relevant ownership share is counted, e.g. if non-UK resident spouses own a UK rental property jointly, each spouse’s qualifying income would be 50% share of their gross rent, if this 50% share exceeds the MTD IT threshold then the regime applies.

MTD deferral for non-UK residents
After some delay, it’s now been confirmed that any individual who:

• filed non-residence pages (SA109) with their 2024/2025 UK self-assessment tax return, and
• expects to file non-residence pages (SA109) with their 2026/2027 UK self-assessment tax return

benefits from a one-year deferral from MTD IT, if they would otherwise need to register for MTD by April 2026.

This deferral will apply automatically i.e. there is no requirement for the individual, or their agent, to apply to HMRC for exemption from MTD IT.

There are other reasons for automatic exemption, for example those without a UK National Insurance Number.

Automatic non-UK resident deferral example
For example, Victor is a Gibraltar resident and owns a London flat that he rents out for £60,000 per year. Victor declares this rental income on his UK self-assessment tax return, because it is UK source, and submits SA109 pages to declare his non-UK resident status (as an aside, this UK rental income is not reportable on Victor’s Gibraltar IT1 tax return).

Ordinarily, Victor would come within MTD IT from April 2026, because his qualifying income is over the relevant threshold i.e. over £50,000.

However, because Victor filed SA109 pages as part of his 2024/2025 UK self-assessment tax return and expects to do so in 2026/2027 (he expects to remain Gibraltar resident and non-UK resident under the UK’s Statutory Residence Test), he will be automatically deferred from MTD for one year and will not need to join until April 2027 at the earliest.

If Victor’s rental income remains at the same level, currently he will have to register for MTD from April 2027 because his qualifying income for 2025/2026 is more than £30,000.

Deferral on application
Where the requirements for automatic non-UK resident deferral are not met (e.g. no non-resident pages (SA109) were filed for 2024/2025), it may be possible to apply to HMRC for the one-year deferral if there is a reasonable expectation of being non-UK resident in the 2026/2027 UK tax year. There is also a similar application process for those who are digitally excluded.

In summary, non-UK residents in receipt of UK rental and/or UK self-employment income, need to consider this significant change to the UK tax reporting regime.