Making Tax Digital – What You Need to Know

Making Tax Digital (MTD) is HMRC’s programme to move record-keeping and tax reporting online, in stages, across different taxes. It’s already compulsory for VAT, and it’s now rolling out for Income Tax too – with real deadlines that have already started to bite for sole traders and landlords.

MTD for VAT: already in force

Every VAT-registered business, whatever its turnover, has had to keep digital VAT records and file returns through MTD-compatible software since April 2022. If you’re VAT-registered and still submitting returns by logging into HMRC’s portal manually or using a spreadsheet with no bridging software, you’re not compliant, and it’s worth sorting out sooner rather than later.

MTD for Income Tax: the rollout that’s now underway

MTD for Income Tax Self Assessment (MTD ITSA) applies to sole traders and landlords based on their combined trading and property income, and it’s being phased in by threshold:

From 6 April 2026 – mandatory for income over £50,000 (based on the income reported on your 2024/25 tax return). This is already live.
From 6 April 2027 – the threshold drops to £30,000
From 6 April 2028 – the threshold drops again to £20,000

If you’re a landlord or sole trader and your relevant income is close to one of these thresholds, it’s worth checking now rather than waiting for HMRC to write to you – the income test looks back at a tax return you’ve already filed, so you may already be in scope for a deadline that’s coming up faster than expected.

What it actually involves

Keeping digital records of income and expenses throughout the year, rather than pulling everything together once at year end
Using MTD-compatible software – a spreadsheet on its own isn’t enough unless it’s linked to bridging software that can submit to HMRC directly
Sending quarterly updates to HMRC, broadly due in early August, November, February and May
Submitting a final declaration after the tax year ends, by the usual 31 January deadline, which replaces the old Self Assessment return for anyone in MTD

The quarterly updates aren’t a full tax calculation each time – they’re a running total of income and expenses. The tax itself is still worked out (and paid) on the same annual basis as now, so this is mainly a change in how and how often you report, not a change to when you pay.

If you’d like help working out when MTD applies to you and getting set up with the right software, get in touch – we support both landlords and sole traders through the transition.

Get in touch

John is the founder of Summed Up Accountancy Services. He qualified as a Chartered Certified Accountant (ACCA) in 2006, worked in practice and then in industry as a Head of Finance, and set up Summed Up in 2019 to give growing businesses and directors straightforward, jargon-free advice.