You might’ve heard of Making Tax Digital (MTD) before. HMRC has been talking about the need to use digital software to file your tax returns for a few years now.
Since 2019, VAT-registered businesses with a taxable turnover above the VAT registration threshold (currently £90,000) have needed to keep their records digitally and provide their VAT return information to HMRC through MTD-compatible software.
This is now set to include most self-employed individuals and landlords, regardless of being VAT-registered. The first people this will affect is self employed or landlords earning over £50,000 for the tax year 24/25
We’ve created a guide on what the changes are, what you need to do, and how you can get ready.
What is Making Tax Digital?
Making Tax Digital (MTD) is a government scheme designed to make it easier for people and businesses to track their tax by keeping and submitting digital records. The aim of MTD is to help businesses reduce errors when it comes to submitting returns while making it easier for them to manage their tax digitally. This involves a shift from paper-based record-keeping to digital records stored in software or apps.
From April 2026, MTD for Income Tax Self Assessment (ITSA) will require self-employed individuals and landlords with business or property income over £50,000 per year to keep digital records and submit quarterly updates to HMRC using compatible software.
From 2027, the threshold will lower to include small businesses and landlords with an income of over £30,000. HMRC is still finalising plans, but there might be another threshold announced for 2029.
It is important to keep a close eye on updates from HMRC, as these thresholds can change.
What are the changes?
There are three main changes that’ll be coming into effect from April 2026 for those with a turnover over £50,000. They are:
Quarterly reporting:
Instead of one annual Self Assessment tax return, businesses will submit quarterly updates of their income and expenses to HMRC digitally.
These updates will need to be submitted within a set timeframe after the end of each quarter (the exact dates will be published by HMRC).
Submissions will have to be made through software that is compatible with HMRC's MTD system.
These quarterly updates are not final tax calculations, but rather a summary of income and expenses.
Digital record keeping:
Businesses will be required to keep digital records of their income and expenses using compatible software or apps. This means maintaining digital records of all transactions, including sales and expenses. These records must be preserved digitally, not just entered and then deleted.
End of year declaration:
While quarterly updates are required, businesses will still need to submit a final declaration at the end of the tax year. The final declaration due by the 31 January following the end of the tax year. (as they have in previous years’ Self Assessment submissions). This is a finalisation of the year’s tax liability, taking into account all quarterly submissions and any other relevant factors. This is where any final adjustments can be made, and any tax owed or due will be calculated.
How you can get ready
MTD is here to make it easier for you to file your income tax returns. The biggest part of that is using a software that is MTD-compliant.
Choose MTD-compatible software
Research and select accounting software that is compatible with HMRC's MTD system. Consider factors like ease of use, features, and cost when choosing software and that it’s officially recognised by HMRC.
You can check if accounting software is MTD-compatible here.
Start keeping digital records now
Don't wait until the deadline to start keeping digital records, even if your business income falls into the lower threshold bands. Practice makes perfect! This will help you get used to the software and ensure you are prepared for MTD.
Seek professional advice
If you’re unsure about any aspect of MTD, seek advice from an accountant or tax advisor. They can help you choose the right software and ensure you are compliant with the regulations.
MTD Roadmap
April 2026: MTD for ITSA becomes mandatory for self-employed individuals and landlords with income over £50,000 in the tax year 24/25
April 2027: MTD for ITSA becomes mandatory for self-employed individuals and landlords with income over £30,000 in the tax year 25/26
Future: HMRC plans to expand MTD to other taxpayers, with potential further thresholds to be announced.
To find out more about the current timelines for MTD-ITSA, head to HMRC’s website here.
MTD doesn’t have to be a big, laborious change, but it’s always better to get started sooner rather than later – even if this won’t impact you next year, getting used to keeping digital records and receipts could help you when it’s your turn to be MTD-compliant.
