Making Tax Digital For Income Tax

Published on Friday 3 October 2025

Table of contents

• What is MTD for Income Tax?
• The benefits of MTD for Income Tax for the self-employed
• Requirements of MTD for Income Tax
• How do I prepare for MTD for Income Tax?
• Getting started with Making Tax Digital preparation
• FAQs on Making Tax Digital for Income Tax
• Explore our MTD for Income Tax resource hub

Key takeaways

• Prepare for MTD for IT by setting up HMRC-recognised accounting software before your compliance deadline, which begins April 2026 for sole traders and landlords earning above £50,000, April 2027 for those above £30,000, and April 2028 for those above £20,000.
• Submit quarterly updates of your business income and expenses four times per year through compliant software, with the first quarterly update due by 7 August 2026, plus an annual final declaration for the 2026/27 tax year by 31 January, 2028.
• Maintain digital records of all business income and expenses using digital software rather than paper records, as this becomes mandatory for eligible sole traders and landlords under the new system.
• Register for MTD for IT through your chosen accounting software rather than directly with HMRC, ensuring you have your business details, National Insurance number, and accounting information ready for the sign-up process.

What is Making Tax Digital for Income Tax

Making Tax Digital for Income Tax (MTD for IT) is a new digital reporting system that aims to modernise how self-employed individuals and landlords manage and report their income tax to HMRC. Instead of filing a single annual Self Assessment, you’ll maintain digital records and submit quarterly updates through HMRC-recognised software. This mandatory change affects businesses based on their total annual income:

• April 2026: Sole traders and landlords earning above £50,000
• April 2027: Those earning above £30,000
• April 2028: Those earning above £20,000

To comply with MTD for IT, you must use accounting software approved by HMRC to keep digital records and submit your returns online. You’ll need to choose and set up HMRC-recognised software before your compliance date. If you’re already using MTD for VAT you’ll be familiar with digital reporting and may already have MTD compatible software in place.

How does MTD for IT work?

Making Tax Digital for Income Tax changes how you report your earnings to HMRC, moving away from a single annual tax return. Rather than filing one Self Assessment return, you’ll maintain ongoing digital records and submit information four times a year.

The new MTD system requires you to:

• use HMRC-recognised software to maintain digital business records
• submit quarterly updates of your income and expenses
• complete a final declaration after the tax year ends to confirm your income and claim any reliefs or allowances

This more frequent reporting gives you more up-to-date visibility of your tax position throughout the year, helping you budget and plan more easily and avoid year-end surprises.

The benefits of MTD for IT for the self-employed

MTD for IT offers significant business advantages beyond compliance. Businesses already using digital tax systems for VAT report measurable improvements in efficiency and financial control.

You can benefit from:

1. Improved accuracy: When software takes care of the numbers, there are fewer chances for human error. For example – automating your data entry, so that bookkeeping records automatically populate your quarterly updates means you don't need to manually type them into your returns.
2. Better tax planning: Every time you submit a quarterly update, you get a clearer view on what your total tax liability will be. This helps with tax planning and cash flow management, because you can prepare for your bill ahead of time.
3. More manageable bookkeeping: While you'll need to submit more updates to HMRC, those updates contain less information. This means that you can turn your bookkeeping into a bitesize monthly or quarterly task – instead of an annual rush.

You can start experiencing these benefits before the HMRC requirements for IT come into place. Cloud-based accounting software is the ideal tool for streamlining tax compliance for self-employed people. By adopting it now, you can see your tax position and cash flow in real time, make bookkeeping a breeze, and reduce errors in your submissions.

Requirements of MTD for Income Tax

MTD for Income Tax requires two main changes to your tax reporting:

• Keep digital records of all business income and expenses using HMRC-recognised software
• Submit your business income and expense data four times per year and make an annual final declaration

These submissions follow a specific schedule and format:

• Quarterly updates: Submit business income and expense data four times per year. For the first phase beginning in April 2026, the first quarterly update will be due by 7 August 2026.
• Annual final declaration: Submit a full declaration, including any other income, allowances, or adjustments, by 31 January following the end of the tax year. For the 2026/27 tax year, this would be 31 January, 2028.

See how these changes compare to current rules:

Before April 2026:

• One annual submission
• Paper filings by 31st Oct
• Online filings by 31st Jan
• Fine to keep paper records

After April 2026:

• Four quarterly submissions per business
• One annual final declaration submission per individual
• Filing via MTD-compliant software
• Keeping digital records

When is the deadline for MTD for IT?

MTD for IT deadlines depend on your total annual income from all business and property sources:

• 6 April 2026: £50,000 and above
• April 2027: £30,000 and above
• April 2028: £20,000 and above

If you have multiple businesses, combine all income to determine your threshold. If you earn below £20,000, you can continue using traditional Self Assessment returns.

What do I need to submit for MTD for IT?

MTD for IT requires two types of submissions to HMRC:

1. Quarterly updates: These should include all business income and expenditure. Quarterly updates are cumulative, so you can include any corrections to past information throughout the year.
2. Final Declaration: This is where you'll need to share details of all other taxable income, including investments and savings interest.

How do I prepare for MTD for Income Tax?

Follow these three key steps to ensure you’re fully compliant for Making Tax Digital for Income Tax before your deadline:

1. Choose and set up HMRC-recognised software

Select compliant accounting software that fits your business needs. Using HMRC-recognised software enables sole traders and landlords to keep digital records of income and expenses and submit quarterly updates and annual submissions directly from the platform.

Look for software with features that make digital record keeping easier, such as invoicing and expense capture.

2. Sign up for MTD for IT

You must register through your software, not directly with HMRC. Before signing up, ensure you have your:

• business name
• business start date (exact date only needed if started in the last two tax years)
• email address
• National Insurance number
• accounting period
• accounting type

Read HMRC's guidance on signing up for more detailed information.

3. Start early

Begin using digital tools well before your compliance date to ensure a smooth transition. This gives you time to get comfortable with the software and new reporting requirements. You can sign up for accounting software now to familiarise yourself with digital record-keeping before your MTD deadline, or if you're ready, you can voluntarily sign up for MTD for Income Tax early. Check the HMRC website for more information on voluntary sign-up options.

Getting started with Making Tax Digital preparation

Getting ready for Making Tax Digital for Income Tax is simple. When you use MTD compatible software, you can make the transition seamless and start enjoying the benefits right away. You gain real-time visibility of your business finances, simplify your record-keeping, and reduce the stress of the year-end tax rush.

Take the first step towards easier financial management and compliance. Try Xero accounting software for free.

FAQs on Making Tax Digital for Income Tax

Here are answers to some common questions about MTD for IT.

What is the difference between MTD for VAT and MTD for Income Tax?

Making Tax Digital for VAT (MTD for VAT) requires VAT-registered businesses to keep digital records and submit VAT returns using MTD compatible software. Making Tax Digital for Income Tax applies to self-employed individuals and landlords. You must report your income and expenses quarterly and make a final declaration annually, replacing the Self Assessment tax return.

Do I need an accountant for MTD for Income Tax?

You can manage Making Tax Digital for Income Tax yourself with the right software. An accountant or bookkeeper can help you set up your software, keep your records accurate, and give you advice on tax planning.

What happens if I have more than one business?

The MTD for IT income threshold applies to your total qualifying income from all your businesses and properties. You'll need to submit separate quarterly updates for each business – for example, a sole trader who also has a property business could submit eight quarterly updates a year – but you will only submit one final declaration that covers all your income sources.

Can the self-employed opt-out of MTD for IT?

If your income is above the threshold, you must comply with MTD for IT. If your income falls below the threshold for three successive years, you may be able to stop complying. MTD for IT is mandatory from 2026 for eligible businesses.

Explore our MTD for IT resource hub

Check out the Making Tax Digital for Income Tax resource hub to prepare for the new legislation. Explore expert guides, articles and FAQs covering everything you need to know about MTD for IT, from quarterly update obligations to changes in self-employed tax returns.