Making Tax Digital for Income Tax: the complete guide

What is Making Tax Digital?

MTD is HMRC’s programme to move tax reporting online. VAT-registered businesses have used MTD for VAT since 2019. MTD for Income Tax applies the same idea to sole traders and landlords: you keep digital records, use compatible software and send HMRC regular updates, instead of one annual return.

Who must use it and when?

Qualifying income is your gross income from self-employment and property, before expenses, based on an earlier tax year. Partnerships are expected to be brought in later. If your qualifying income is £20,000 or less you do not need to use MTD for Income Tax.

What you must do under MTD

1. Keep digital records of income and expenses in compatible software.
2. Send quarterly updates of your income and expenses to HMRC.
3. Make a final declaration at the end of the year, which replaces the traditional return.

HMRC has said a points-based penalty system for late quarterly updates applies from the 2027/28 tax year.

How to prepare now

• Work out your qualifying income to see when you must join.
• Choose MTD-compatible software and connect your bank feeds.
• Separate business and personal spending.
• Keep digital copies of receipts and invoices.
• Ask an accountant to submit updates for you.

Quarterly update deadlines

Quarterly updates are due one month after each quarter ends, so the standard dates are:

Quarterly updates do not replace your tax bill: you still pay on the normal dates, and the final declaration finishes the year.

What goes into a quarterly update

• Total income for the quarter, from self-employment and property.
• Total allowable expenses by category.
• Any adjustments your software or accountant makes.

HMRC uses the updates to give you a running estimate of your tax so there are fewer surprises at the end of the year.

Choosing MTD software

Use software that is on HMRC’s list of MTD-compatible products. Look for bank feeds, receipt capture, mileage tracking and the ability to submit updates directly. Many people prefer to let their accountant run the software and submit on their behalf.

Exemptions

HMRC can exempt people who cannot use digital tools because of age, disability, remoteness or religion. Apply to HMRC before you are due to start. If your qualifying income is £20,000 or less, you do not need to use MTD for Income Tax at all.

MTD for London sole traders and landlords

We set up digital records and file quarterly updates for sole traders and landlords across all 32 London boroughs. Pages for your area include Camden, Newham and Croydon.