Do I need new software for MTD?

Possibly. You need MTD-compatible software — either an accounting package like Xero, QuickBooks or FreeAgent, or bridging software that connects spreadsheets to HMRC. HMRC publishes an approved list.

What's a quarterly update under MTD ITSA?

A quarterly update is a summary of your business income and expenses sent to HMRC within one month of each quarter end. It's not a tax bill — the final tax is settled in the year-end declaration by 31 January, replacing the old SA100.

Are landlords affected by MTD?

Yes. Landlords with qualifying property income over £50,000 are in scope from April 2026, with lower thresholds following. Joint property owners only count their share of the income.

What if my income is below the threshold?

You won't be required to use MTD for Income Tax until your qualifying income (self-employment plus property gross income) crosses the threshold. You can still file a normal Self Assessment return until then.

Guides

Making Tax Digital (MTD) Explained

What MTD means for VAT and Income Tax, who's affected, when the rules apply, and how to choose compatible software.

1 min read·Updated 27 May 2026

Quick answers

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's programme requiring businesses and landlords to keep digital records and submit tax data through compatible software. MTD for VAT is already mandatory; MTD for Income Tax begins in April 2026 for sole traders and landlords with income over £50,000.

When does MTD for Income Tax start?

MTD for Income Tax Self Assessment starts in April 2026 for sole traders and landlords with qualifying income over £50,000. The threshold drops to £30,000 from April 2027, and £20,000 from April 2028.

Can I still use spreadsheets under MTD?

Yes, but you need bridging software to submit the data to HMRC and maintain digital links between your spreadsheet and the submission. The spreadsheet must hold all the required records — manual retyping into another system isn't allowed.

Making Tax Digital Explained

Making Tax Digital (MTD) is HMRC's programme to digitise tax records and reporting. Instead of paper or web-form returns, you keep digital records and submit data through software that talks directly to HMRC.

MTD for VAT

Already mandatory for all VAT-registered businesses. You must:

Keep VAT records digitally.
Use MTD-compatible software (or bridging software) to submit returns.
Maintain digital links between every step of your record-keeping.

MTD for Income Tax (ITSA)

Phased rollout:

April 2026 — sole traders and landlords with qualifying income over £50,000.
April 2027 — threshold drops to £30,000.
April 2028 — threshold drops to £20,000 (announced; subject to confirmation).

Once in scope, you must:

Keep digital records of business income and expenses.
Submit a quarterly update to HMRC (within 1 month of each quarter end).
Submit a final declaration by 31 January (replacing the SA100).

What counts as compatible software?

HMRC publishes an approved list. Options include:

All-in-one accounting packages (Xero, QuickBooks, FreeAgent, Sage).
Spreadsheets plus bridging software that submits the data.
Specialist landlord apps (Hammock, Coconut).

Practical tips

Start now even if not yet mandated — get used to digital records.
Connect your bank for automatic transaction feeds.
Test the quarterly cadence — many self-employed people only think about tax once a year, and switching to quarterly takes adjustment.
Keep receipts digitally — a phone scan attached to each transaction satisfies digital record requirements.

This is general guidance for the 2025/26 UK tax year and is not personal tax advice. Always check the latest figures on GOV.UK or speak to a qualified accountant for your situation.

Frequently asked questions

Related guides

Example: MTD VAT Submission Walkthrough

Step-by-step example of preparing and submitting a Making Tax Digital VAT return using accounting software.

VAT Registration and Returns: A Practical Guide

When to register for VAT, choosing between standard, flat-rate and cash schemes, filing returns under MTD, and the rules every UK business needs to know.