What is Making Tax Digital (MTD)?

What Making Tax Digital means

Making Tax Digital replaces paper records and manual online forms with software that keeps records digitally and sends information to HMRC directly. It is being rolled out tax by tax.

• MTD for VAT has applied to every VAT-registered business since April 2022. VAT returns must be filed through compatible software.
• MTD for Income Tax starts on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, then over £30,000 from April 2027 and over £20,000 from April 2028.

Qualifying income is your gross self-employment turnover plus gross property income, before expenses. Under MTD for Income Tax you send quarterly updates and then a final declaration by 31 January after the tax year, which replaces the tax return.

Example

A landlord receives £28,000 in rent and also runs a small consultancy with £26,000 of turnover. Qualifying income is £54,000, so she must follow MTD for Income Tax from 6 April 2026. Her quarterly updates cover the periods to 5 July, 5 October, 5 January and 5 April, each due on the 7th of the month after the quarter ends.

What you need to do

1. Check your qualifying income for the tax year two years before your start date.
2. Choose software that is recognised by HMRC for MTD for Income Tax.
3. Keep each sale and expense digitally as it happens, rather than at the year end.
4. Sign up for MTD for Income Tax before your first quarterly update is due.

Why it matters for your business

Keeping records digitally throughout the year, rather than gathering them once a year, is the main change. Spreadsheets are allowed only with bridging software that sends the data to HMRC. Late tax returns build up penalty points under the newer penalty regime, and from 2027/28 late quarterly updates will too; for 2026/27 there is no penalty for a missed quarterly update. Our full guide to Making Tax Digital for Income Tax explains exemptions, software and how to prepare.