Making Tax Digital, set up and handled
We get you ready for Making Tax Digital, set up the right software and file your quarterly updates, so it takes as little of your time as possible.
Making Tax Digital (MTD) is HMRC's move to digital records and quarterly reporting. Every VAT-registered business has followed MTD for VAT since April 2022.
MTD for Income Tax began on 6 April 2026 for sole traders and landlords whose income from self-employment and property, before expenses, is over £50,000. It extends to income over £30,000 from April 2027 and over £20,000 from April 2028. Those in it keep digital records, send HMRC an update every quarter and make a final declaration after the tax year.
We tell you whether and when it applies to you, set you up on software that suits how you work, and can file the quarterly updates for you.
- 1We check when MTD applies to you
- 2We recommend software that suits how you work
- 3We set it up and show you how to use it
- 4We keep your records, or review the ones you keep
- 5We file your quarterly updates
- 6We complete your final declaration
Who it affects, and how
Making Tax Digital changes when and how you report to HMRC, not how much tax you pay or when you pay it. What it means in practice depends on where your income comes from.
Sole traders
- Your turnover before expenses counts towards the threshold, added to any rental income you have.
- Income and expenses are recorded digitally through the year, with the amount, date and category of each.
- Four updates a year, each covering the tax year to date, then a tax return by 31 January.
- Your payment dates stay the same: 31 January and 31 July.
Landlords
- Gross rents count towards the threshold, not your profit after costs, so a modest portfolio can bring you in.
- For a jointly owned property, only your share of the rent counts.
- Rents and any self-employed income are added together to decide whether you are in.
- Property held in a limited company is outside Making Tax Digital for Income Tax, which applies to individuals.
VAT-registered businesses
- Already in Making Tax Digital for VAT, with digital records and returns filed through compatible software.
- Figures must move between programs through digital links. Copying and pasting doesn't count.
- A VAT-registered sole trader over the income threshold is in both, on different timetables. One set of digital records can serve both.
- Penalty points for VAT and for Income Tax are counted separately.
Choosing your software
You need software that works with Making Tax Digital. There are three ways to approach it, and the right one depends on how you keep records now.
Spreadsheet with bridging software
Keep your spreadsheet, and send updates through a bridging product.
- Suits
- Landlords and sole traders with few transactions who already keep a tidy spreadsheet.
- How it works
- Your spreadsheet holds the digital records. Bridging software reads your figures and sends the updates to HMRC.
- Watch out for
- The link must be digital. Once a record has been sent to HMRC, it must not be moved between programs by copying or pasting.
Full bookkeeping software
Cloud software that keeps your records and files your updates.
- Suits
- Businesses with regular sales and costs, and anyone also registered for VAT.
- How it works
- Bank feeds bring your transactions in, you or we categorise them, and the software sends the quarterly updates and your tax return.
- Watch out for
- There is a subscription to pay, and bank feeds still need checking, not just accepting.
We keep the records and file for you
You send us your paperwork, and we do the rest.
- Suits
- Owners who would rather not deal with Making Tax Digital at all.
- How it works
- We keep your records in software we set up for you, send each quarterly update, and prepare your tax return for you to approve.
- Watch out for
- You remain responsible for what is filed, so we need your paperwork in good time each quarter.
The quarterly cycle and your tax return
Each quarterly update is cumulative: it covers everything from the start of the tax year to the end of that quarter. Because each one includes the earlier months, a mistake is put right in your records and simply flows into the next update.
The updates are summaries, not tax returns. After the year ends, we make the year-end adjustments, add your other income, such as dividends, savings interest or partnership profits, and submit your tax return by 31 January.
- Quarter to 5 July: update due by 7 August
- Quarter to 5 October: update due by 7 November
- Quarter to 5 January: update due by 7 February
- Quarter to 5 April: update due by 7 May
- If your accounts run to 31 March, you can use calendar quarters (to 30 June, 30 September, 31 December and 31 March) with the same deadlines.
Penalties and late payment
Late filing earns points rather than an automatic fine. Each missed deadline, whether a quarterly update or the tax return, adds one point. At four points you pay a £200 penalty, and another £200 for every further missed deadline. Points below the threshold expire after 24 months. Once you reach four, they are cleared only after 12 months of filing everything on time and catching up anything outstanding. For 2026/27, HMRC is not giving points for late quarterly updates, but a late tax return still counts.
Late payment penalties start once tax is more than 15 days late. For 2026/27, the penalty is 3% of the tax unpaid at day 15, another 3% of what is still unpaid at day 30, then a further penalty charged daily at 10% a year, with late payment interest on top. In your first year under the new rules you have 30 days, not 15, to pay or agree a payment plan with HMRC. The two 3% penalties rise to 4% for 2027/28.
Who is exempt, and who can wait
Some people don't need to use Making Tax Digital for Income Tax at all, and others join only when their income passes the threshold. Exempt or not, you still file a tax return each year.
- Partnerships, which have no start date yet. A partner's share of partnership profit doesn't count towards their own qualifying income.
- Automatic exemptions, including people without a National Insurance number, trustees, personal representatives of someone who has died, and ministers of religion.
- Temporary exemptions, until April 2027 at the earliest, for some people who claim averaging relief or qualifying care relief (for example foster carers), or who file the residence pages.
- Digital exclusion: if it isn't reasonable for you to use software, because of age, disability, location or another reason, you can apply for an exemption. Being unfamiliar with software is not enough on its own.
- Leaving: if your qualifying income stays below the threshold for three years in a row, you can opt out.
Questions we’re often asked
I'm already in Making Tax Digital for VAT. Am I covered for Income Tax?
No. They are separate. Making Tax Digital for Income Tax depends on your self-employment and rental income, not on your VAT registration. If both apply, the same bookkeeping software can usually handle both, and we file each on its own timetable.
Does Making Tax Digital change when I pay tax?
No. Payments on account and balancing payments are still due on 31 January and 31 July, and nothing is payable when you send a quarterly update. The updates do show how the year is going, which helps you plan for the bill.
What if I make a mistake in a quarterly update?
Correct it in your records and it flows into the next update, because each one covers the year to date. The final quarterly update can be sent again if needed, before the tax return is completed.
How will I know which year I'm brought in?
HMRC decides from the tax return for two years earlier. Whether you are in from April 2027, for example, depends on the qualifying income on your 2025/26 return, which is due by 31 January 2027. We check your figures and tell you in good time. You can also join voluntarily before you have to.
Rules and limits checked 9 October 2026.
Talk to us about your tax.
A free call with the team. We’ll contact you within 24 hours.