What is Making Tax Digital? A plain-English guide
Making Tax Digital (MTD) is HMRC's move to digital record keeping and reporting through software. It started with VAT and now covers Income Tax for sole traders and landlords. Here is what it is, who it affects and what actually changes.
Making Tax Digital at a glance
| Tax | Who | When |
|---|---|---|
| VAT | All VAT-registered businesses | Since April 2022 (April 2019 above the VAT threshold) |
| Income Tax | Sole traders and landlords, qualifying income over £50,000 | From 6 April 2026 |
| Over £30,000 | From 6 April 2027 | |
| Over £20,000 | From 6 April 2028 | |
| Income Tax | Partnerships | Later — date not set yet |
| Corporation Tax | Limited companies | Not planned: HMRC said in July 2025 it does not intend to introduce it |
Qualifying income is your self-employment and property income before expenses. The government expects 900,000 more sole traders and landlords to join when the threshold drops to £20,000 in April 2028.
What stays the same, what is new
✅ Stays the same
- One tax return a year, due by 31 January.
- You pay your tax as you do now, by 31 January — MTD does not change how or when you pay.
- The same income and expense categories as Self Assessment.
🆕 What is new
- You use HMRC-recognised software.
- You keep digital records of your self-employment and property income and expenses.
- You send a quarterly update every three months — a summary, not a tax return.
- You add any other income and submit your tax return through your software.
- A new points-based system for late submissions.
Your first year, step by step
This is HMRC's timeline for people who started on 6 April 2026. If MTD starts for you in April 2027, every date moves one year later.
| What you do | By when (start in April 2026) |
|---|---|
| Create digital records in your software | From 6 April 2026 (from 1 April with calendar update periods) |
| First quarterly update | 7 August 2026 |
| Second quarterly update | 7 November 2026 |
| Third quarterly update | 7 February 2027 |
| Fourth quarterly update | 7 May 2027 |
| Submit your tax return through your software and pay any tax due | 31 January 2028 |
When you send an update, you can see an estimate of your tax bill so far. All dates, penalties and exemptions
Does it apply to you, and from when?
Answer a few questions: your start date, a calendar of deadlines and software that fits.
Questions people ask
Does Making Tax Digital apply to my pension?
Not on its own. The State Pension and private pensions do not count towards qualifying income, so a pension alone never brings you into Making Tax Digital for Income Tax. It only applies if your self-employment and rental income, before expenses, is over the threshold. If it does apply, you still report your pension in your tax return through your MTD software — check that your software handles it: 35 of the 158 HMRC-recognised products list State Pension and private pension income as ready now and can send the final return.
Will I have to pay tax every quarter?
No. Quarterly updates are summaries of your income and expenses, not tax returns or payments. HMRC says Making Tax Digital for Income Tax does not change the way you pay tax or the dates payments are due.
Does Making Tax Digital apply if I am employed?
Only if you also have self-employment or rental income and your qualifying income from those is over the threshold. Your salary itself does not count towards qualifying income.
I earn less than £20,000 from self-employment and property. Am I affected?
No. If your qualifying income is £20,000 or less, you are automatically exempt. You keep filing your Self Assessment tax return as usual.
Can I keep using a spreadsheet?
Yes. Bridging software reads the figures in your spreadsheet and sends them to HMRC. If you use more than one product, your records must be digitally linked — no copying and pasting once a record has been sent in an update. See every recognised bridging tool.
Do I need an accountant?
No. Many people use the software themselves. If you have an accountant, they can sign you up, send your quarterly updates and submit your tax return for you with agent software.
What happens if I send a quarterly update late?
For the 2026 to 2027 tax year, HMRC will not give penalty points for late quarterly updates (late tax returns still get points). After that, each late update earns a point, and at 4 points you get a £200 penalty. All dates and penalties.
Is there free Making Tax Digital software?
Yes. 37 of the 158 HMRC-recognised products have a free version, and some business bank accounts include MTD software at no extra cost. Free versions differ a lot: some cannot send the final tax return. Compare the free options.
Does Making Tax Digital apply to limited companies?
Making Tax Digital for Income Tax does not apply to limited companies. A VAT-registered company already follows Making Tax Digital for VAT. Directors can still be in scope personally if they have their own self-employment or rental income. MTD for limited companies.
What about partnerships?
Partnerships will also need to use Making Tax Digital for Income Tax in the future. HMRC has not set the date yet. Your share of partnership profit does not count towards your own qualifying income.
Sources (checked 9 October 2026): GOV.UK — Making Tax Digital for Income Tax explained, when you need to use it, qualifying income, exemptions, submit your tax return, quarterly updates and penalties, MTD for VAT, technical note, March 2025 (900,000 from 2028); Association of Taxation Technicians — MTD for Corporation Tax. Software data: HMRC software finder (Open Government Licence v3.0). This is guidance, not tax advice.