The UK’s digital tax system is the government’s move towards a more digitally managed approach, requiring records and updates to be handled through compatible software rather than older manual methods. For anyone dealing with Self Assessment, that means practical changes are coming. Not all at once. But steadily enough that it is worth understanding what shifts, who it affects, and what to prepare for next.
What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is a UK government initiative to modernise the tax system, moving record-keeping and reporting into a digitally managed process. Instead of relying on annual submissions, you’ll need to send updates through compatible software throughout the year. It applies to VAT and Income Tax, with guidance available on gov.uk. To stay compliant, you need to follow the rules set out under the scheme and use approved digital tools.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax shifts how sole traders and landlords report your income. No more relying on one annual return. Instead, you’ll need to start using compatible software, keep digital records, and send quarterly updates with tax estimates directly to HMRC. It begins in April 2026 for those earning over £50,000. Then £30,000 in April 2027. Then £20,000 in 2028. The structure changes. You still file a final declaration, but the process becomes ongoing.
Making Tax Digital Key Changes and Timeline
The UK’s digital tax system first became mandatory in April 2019, when VAT-registered businesses with taxable turnover above £85,000 had to follow the new VAT rules. That was the first real shift. Since then, the rollout has widened, and the timeline has been pushed back more than once.
Now the key dates are firmer. From 6 April 2026, sole traders and landlords earning over £50,000 will need to comply. Those earning over £30,000 follow in April 2027. Then, from 6 April 2028, the threshold drops to £20,000. That will bring in a much broader group, potentially affecting the whole business, not just year-end reporting. Unless you are eligible for an exemption, this is the deadline structure and everything you need to know for planning ahead.
| Qualifying Income (Gross) | Mandation Date | Based on Tax Return Year |
| Over £50,000 | 6 April 2026 | 2024/25 Return |
| Over £30,000 | 6 April 2027 | 2025/26 Return |
| Over £20,000 | 6 April 2028 | 2026/27 Return |
Who MTD Applies To?
The rules for who must join the new system depend on how much you make from self-employment or property income. Starting in April 2026, sole traders and landlords with a total gross income over £50,000 must use Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). If you earn over £30,000, you need to comply with MTD from April 2027. From 6 April 2028, the scope widens again; sole traders and landlords with a qualifying annual income over £20,000 must use Making Tax Digital for Income Tax. Always check your total income from these sources, not just profit, to see if you need to sign up for MTD. HMRC determines whether you must join the 2026 rollout based on the ‘qualifying income’ reported in your 2024/25 tax return—the one you likely submitted by January 2026.
Making Tax Digital Requirements
The shift to MTD for Income Tax introduces a few specific requirements that replace the old annual tax return process. Instead of doing everything at once, the workload is spread out across the year to make things more manageable and accurate.
Digital Records
You will no longer be able to keep manual records like handwritten ledgers or simple spreadsheets that aren’t linked to software. You must keep digital records of all your business transactions. This means using software to record every sale and every expense as they happen. It helps ensure your records are safe and backed up, instead of risking lost paperwork. This is a big change in how you manage your daily business admin and keep digital records and submit updates.
Quarterly Updates
With the new process, you must send summary updates to HMRC every three months. These quarterly updates will show your income and expenses over each quarter. These updates are due by the 7th of the month following each quarter end. For example, for your first quarter (April to June), you must submit your update to HMRC by 7 August. You don’t need to make all the accounting adjustments here. It just lets HMRC and the tax system know how you’re getting on through the year. This helps you estimate your tax bill ahead of time so you’re not caught by surprise, and you stay on pace to comply with MTD rules.
| Quarter Period | Update Deadline |
| 6 April – 5 July | 7 August |
| 6 July – 5 October | 7 November |
| 6 October – 5 January | 7 February |
| 6 January – 5 April | 7 May |
| Final Declaration | 31 January (Following Year) |
Final Declaration
At the end of the tax year, you must make a final declaration to confirm that your figures are correct. This replaces the old-style Self Assessment tax return. The final declaration step is where you review the whole year, claim any reliefs or allowances, and adjust details if you need to. It’s the last step to get your tax right, so you can check everything before your bill is set.
No Change to Payment Dates
Even with these more frequent updates, payment dates don’t change much. You still need to pay HMRC by 31 January following the end of the tax year, as well as keep on top of any payments on account. While reporting moves to a quarterly basis, you aren’t expected to pay tax each quarter. The focus is on better records and more regular updates, not faster payment. For the 2026/27 tax year (the first year under MTD for many), your final balancing payment will still be due by 31 January 2028.
How Self-Assessment Works Now?
Right now, self-employed individuals and landlords complete one Self Assessment tax return each year, covering the period from 6 April to 5 April, with a submission deadline the following January. Most still gather records retrospectively. Sometimes late. Sometimes incomplete. It works, but not always cleanly. Errors slip in, or things get missed under pressure. HMRC already expects online filing for most, with paper now limited. The shift ahead leans towards all-in-one, Making Tax Digital software, where records are kept continuously rather than rebuilt at year end.
Why MTD can Make Life Easier for Sole Traders
Even though it sounds like more work, using MTD can cut stress for sole traders. With proper accounting software, your receipts and expenses are captured on the go – no big piles of paperwork each January. For example, if you’re self-employed or a landlord, using MTD-compatible software helps you stay organised and ready for tax season. You also get a clearer snapshot of your finances year-round, making it easier to manage your cash flow and plan ahead.
Self Assessment vs Making Tax Digital for Income Tax: What is Required?
The most noticeable difference is how often you interact with the tax system. With classic Self Assessment, it’s just one form a year. With MTD for Income Tax, you need to use MTD-compliant software to submit info at least five times – quarterly updates and one final declaration. With the digital route now mandatory, you must keep digital records, which reduces lost data and helps you comply with MTD at all points.
How to Prepare for MTD?
Getting ready for these changes doesn’t have to be overwhelming if you break it down into smaller steps. You have time before the mandate kicks in, so use it to get your business administration in order gradually.
1. Check your Income
First, add up your income from self-employment and property rental. If you make over £50,000, you need to get ready for April 2026. For £30,000 or more, your time comes in April 2027. After April 2028, anyone earning over £20,000 will use Making Tax Digital for Income Tax. It doesn’t matter if you’re not VAT registered – you still need to check these new rules and use MTD if you meet the thresholds.
2. Choose MTD Software
Pick a software package that meets the MTD rules. Xero and many other HMRC recognised software providers offer easy-to-use options. If you like using a spreadsheet, see if you can use bridging software to link your info to HMRC. Try a few systems out and find the best fit for your workflow, making sure it’s on the list of software that lets you use Making Tax Digital for VAT or income tax as needed. If you aren’t ready to move to a full accounting package, look for ‘Bridging Software.’ This allows you to keep using spreadsheets while still being compliant with HMRC’s digital requirements.
3. Start Digital Record Keeping
Don’t wait until it’s compulsory. Begin digital record-keeping right away. Get used to logging income and expenses in your chosen system so shifting to the new rules is easier. Practise sending test updates, so using MTD quickly feels normal and you will be able to comply with MTD requirements confidently.
4. Consider an Agent
If handling these updates feels complex, you can always ask for professional help. Accountants and bookkeepers know all about making tax digital for VAT and income tax, and can manage digital tax records for you. They’ll ensure you use MTD accurately and on time, and help with applying for exemptions if you truly can’t use digital systems.
How to Sign Up for Making Tax Digital?
To sign up, you first check eligibility on GOV.UK and confirm your current tax position is up to date. Timing matters. Then choose compatible software, as you’ll need it before registering. Through your Government Gateway account, you connect and authorise the software to submit updates to HMRC. The process is supported by webinars and step by step guidance, helping you move across without disrupting your existing Self Assessment responsibilities or missing key reporting requirements.
Get Ready for Making Tax Digital with Expert Support
MTD is not going away. The dates are now clear, with Income Tax mandation starting from 6 April 2026 for those above the first threshold, then widening further in 2027 and 2028. Getting ready early matters. It gives you time to choose suitable software, organise digital records, and avoid rushed decisions close to the deadline. If you want proper support, CryptoTaxation can help you understand what applies, set up an all-in-one process, and keep reporting aligned with HMRC expectations. Clear advice. Practical help. If you are unsure where to start, this is the right time to give us a call.
FAQs
What does HMRC mean by going digital?
HMRC wants taxpayers to move away from paper and use MTD-compatible digital software or apps. By doing this, you create a clear digital trail for all your business and property income. It reduces errors and helps both you and HMRC get things right. To use making tax digital means you need to keep everything online, so tax info is easier to access and check. means to move everything online, so tax info is easier to access and check.
What are the downsides of Making Tax Digital (MTD)?
Some people worry about the cost of new software and the time to learn a digital system. It also means you need a good internet connection and basic tech skills. Submitting info quarterly feels like more admin, not less. For people who aren’t used to digital, it might feel like too much change. But if you use MTD and learn the basics, it becomes much easier to cope and submit quarterly updates to HMRC.
If I’m VAT registered, does qualifying income include or exclude VAT?
For MTD for Income Tax, gross income is usually calculated before deducting expenses but doesn’t count VAT you charge. The first phase of making tax digital for VAT started in April 2019 for VAT-registered businesses above the threshold. If you already use MTD for VAT, you’re familiar with digital processes, and you should check if you meet the income requirements for the income tax roll-out.
If I don’t have property or self-employment income, does MTD affect me?
No. MTD rules for income tax only apply to sole traders and landlords with business or rental income. If you’re only earning wages from PAYE and have no property or business income, you don’t have to use Making Tax Digital for Income Tax. Just keep watching mtd for income tax news for any changes, but for now, only those with self-employed or property earnings must comply with MTD.
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