Making Tax Digital (MTD) is the biggest change to UK tax administration in a generation. If you're self-employed or a landlord, here's exactly what it means and how to get ready without stress.
What is Making Tax Digital?
MTD is HMRC's programme to digitise tax. Instead of one annual return assembled from paper records and spreadsheets, you:
- Keep your records digitally in compatible software, and
- Submit regular updates to HMRC through that software.
The goal is fewer errors, closer-to-real-time tax, and an end to the shoebox-of-receipts approach.
MTD for VAT
This is already live. All VAT-registered businesses must keep digital VAT records and file returns through MTD-compatible software. If you're VAT-registered, you're already in scope — see our guide to VAT registration.
MTD for Income Tax (ITSA)
This is the big change for the self-employed. It replaces the annual Self-Assessment with quarterly updates plus a final declaration. The rollout is based on qualifying income (your gross self-employment and property income):
| Qualifying income | MTD for Income Tax applies from |
|---|---|
| Over £50,000 | April 2026 |
| Over £30,000 | April 2027 |
| Over £20,000 | April 2028 |
How quarterly updates work
Under MTD for Income Tax you submit a summary of income and expenses each quarter:
- Quarter 1: 6 Apr – 5 Jul, due 7 Aug
- Quarter 2: to 5 Oct, due 7 Nov
- Quarter 3: to 5 Jan, due 7 Feb
- Quarter 4: to 5 Apr, due 7 May
After the year you prepare and submit your tax return through compatible software by 31 January, including any adjustments, allowances and other income.
The penalty system
MTD uses a points-based late-submission penalty system. The exact treatment can depend on the obligation and tax year, so check HMRC's current guidance if a deadline is missed. Late-payment rules are separate.
What counts as "digital records"
You must keep your records in software or via a digital link — not retype them from paper into a return once a year. In practice this means using MTD-compliant bookkeeping software that captures income and expenses as you go.
How to prepare in five steps
- Check your income against the thresholds above.
- Choose MTD-compatible software and connect your CSV/Excel import.
- Go digital now — start capturing receipts and income digitally even before your start date.
- Set reminders for quarterly deadlines.
- Loop in your accountant with read-only access so they can file or review.
Why this is actually good news
It sounds like more admin, but MTD nudges you toward habits that help: current books, a clear view of your tax all year, and no January reconstruction. With the right bookkeeping software, quarterly updates take minutes because the figures are already prepared.
Frequently asked questions
What is MTD? HMRC's move to digital record-keeping and regular online submissions.
Who has to comply? VAT-registered businesses now; self-employed and landlords over £50k from April 2026, over £30k from 2027.
What if I miss a deadline? Check HMRC's current points-based late-submission penalty guidance for the relevant obligation and tax year.
Get MTD-ready the easy way — start your free trial today.
