Making Tax Digital for Income Tax, explained in plain English

What is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) for Income Tax is HMRC's new way for sole traders and landlords to report their income. Instead of sending everything once a year, you keep your records digitally and send HMRC a short summary of your income and expenses every three months, using software that works with HMRC.

It replaces the old way of filing Self Assessment for your business and property income. It started on 6 April 2026 and is being rolled out in stages, starting with people who earn the most.

Who needs to use it, and when

Whether you need to use MTD depends on your qualifying income: the total you earn from self-employment and property before expenses. HMRC looks at the figure on an earlier Self Assessment tax return to decide when you start.

If HMRC has written to say it has signed you up, you don't need to sign up again, but you do need compatible software. Check what to do if HMRC has signed you up (opens in a new tab). Some people are exempt or can apply for an exemption; GOV.UK explains who (opens in a new tab).

What you need to do

1. 1

   Keep digital records

   Record your business income and expenses in software (or a spreadsheet linked to software) as you go, rather than on paper.

2. 2

   Send four quarterly updates a year

   A summary of your income and expenses, sent from your software. It takes minutes if your records are up to date.

3. 3

   File your tax return by 31 January

   After the tax year ends, you confirm your figures, add anything else (like other income or allowances) and submit. This is sometimes called the final declaration.

Quarterly update deadlines

The deadlines are the same every year. Each update is cumulative: it covers the tax year so far, not just the latest three months, so you can correct earlier figures in your next update.

Most people use the standard periods, which follow the tax year (6 April to 5 April). If your accounts run from 1 April to 31 March you can choose calendar quarters instead; you pick this in your software before your first update. The deadlines don't change. HMRC's guide to quarterly updates (opens in a new tab)

What isn't changing

• When you pay. Tax is still due on 31 January, with payments on account on 31 January and 31 July if you make them. Quarterly updates are not bills.
• How much tax you pay. MTD changes how you report, not the tax rates or what you can claim.
• One tax return a year. You still file once a year, by 31 January after the tax year ends.

What counts as digital records

For each business transaction, your software needs to hold at least the date, the amount and the category (for example, “travel” or “office costs”). Keep your receipts and invoices as evidence, as you do today; a photo or PDF is fine.

Software that connects to your bank account can create most of these records for you, so you only need to check and categorise them.

Penalties

HMRC uses a points system for late quarterly updates. For the 2026 to 2027 tax year, no penalty points are given for late quarterly updates. From 6 April 2027 you get one point for each missed deadline, and a £200 penalty once you reach four points. Points expire after a period of sending everything on time.

Penalties for filing your tax return late and paying tax late still apply as normal. See HMRC's penalties guidance (opens in a new tab)

How to get ready: a checklist

1. 1

   Work out your qualifying income

   Add up your self-employment and property turnover (before expenses) from your latest tax return, and check it against the table above.

2. 2

   Choose MTD-compatible software

   It must be able to keep your records and send updates to HMRC. HMRC lists compatible software on GOV.UK.

3. 3

   Sign up for Making Tax Digital

   Unless HMRC has already signed you up, do it on GOV.UK with your Government Gateway login. Sign up on GOV.UK (opens in a new tab)

4. 4

   Keep business money separate

   A separate account or card for your business makes your records far quicker to keep. It isn't required, but it helps.

5. 5

   Put tax aside as you earn

   Quarterly updates give you a running picture of your tax bill. Saving a share of each payment avoids a January surprise.

Common myths

• Myth: “I'll have to pay tax every quarter.”

  Reality: You send updates quarterly, but you pay on the same dates as before.

• Myth: “It's based on my profit.”

  Reality: It's based on turnover before expenses, so many people with modest profits are included.

• Myth: “I can keep paper records and type them in at the end of the year.”

  Reality: Records need to be kept digitally through the year, and updates sent every quarter.

• Myth: “I need an accountant now.”

  Reality: You can do it yourself with the right software. An accountant is optional.

Questions