What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's plan to modernise the UK tax system by requiring businesses and individuals to keep digital records and submit tax updates using compatible software.
How Does MTD Work?
Under MTD, instead of filing a single Self Assessment tax return at the end of the year, you'll need to:
- Keep digital records of all your income and expenses
- Use HMRC-compatible software (not spreadsheets alone)
- Send quarterly updates to HMRC through your software
- Submit a final declaration at the end of the tax year
Who Does MTD Affect?
MTD for Income Tax Self Assessment (MTD ITSA) affects:
- Self-employed individuals — sole traders, freelancers, contractors
- Landlords — anyone receiving rental income from property
- Partnerships — will be included in a later phase
MTD for VAT is Already Live
If you're VAT-registered, you should already be complying with MTD for VAT, which has been mandatory since April 2022 for all VAT-registered businesses.
Key Dates
April 2026MTD for Income Tax begins for those with income over £50,000
April 2027Extended to those with income over £30,000
What Software Do I Need?
You'll need accounting software that is recognised by HMRC as MTD-compatible. The most popular options are:
- FreeAgent — best for freelancers and sole traders
- Xero — best for growing businesses
- QuickBooks — best for mixed income (self-employment + rental)