Making Tax Digital (MTD) is HMRC's programme to move tax reporting online: businesses keep digital records and submit updates using compatible software instead of manual returns. MTD for VAT has applied to all VAT-registered businesses since 2022. The bigger change now is MTD for Income Tax, phasing in from April 2026 for sole traders and landlords above certain income levels. This guide explains what applies to you and when.
Making Tax Digital Key Facts 2026
- MTD for VAT: mandatory for all VAT-registered businesses since April 2022
- MTD for Income Tax: from April 2026 for income over £50,000
- From April 2027: extends to income over £30,000
- Quarterly updates: submit income and expenses every 3 months
- Digital records: must be kept in compatible software
- Companies: MTD for Corporation Tax not yet mandated — watch for updates
MTD for VAT
Since April 2022, every VAT-registered business — regardless of turnover — must keep digital VAT records and file returns through MTD-compatible software. Manual entry on HMRC's website is no longer allowed for VAT. If you are VAT-registered you should already be compliant; if you have just registered, set up bridging or full accounting software before your first return. See our VAT return filing guide.
MTD for Income Tax from April 2026
The headline change is MTD for Income Tax Self Assessment (MTD ITSA). From April 2026 it applies to sole traders and landlords with qualifying gross income over £50,000. From April 2027 the threshold drops to £30,000, and a further extension to £20,000 is planned. Income is measured on your combined self-employment and property turnover, not profit.
Note this affects individuals — sole traders and landlords — not limited companies. If you trade through a company, your corporation tax is not yet within MTD.
Quarterly updates and digital records
Under MTD ITSA you must keep digital records of business income and expenses and send HMRC a summary every quarter through compatible software. After the year end you finalise the position with a year-end declaration replacing the old Self Assessment return. In practice that means five submissions a year instead of one.
Records must be digital and linked — copying figures manually between systems breaks the “digital links” rule.
Choosing compatible software
You need software recognised by HMRC — full bookkeeping packages (such as those aimed at small businesses) or, for VAT, “bridging” software that connects a spreadsheet to HMRC. Pick a package that covers both VAT and Income Tax if you will need both, and get comfortable with it before the deadline rather than in your first live quarter.
What about limited companies?
MTD for Corporation Tax has been discussed but is not yet mandatory and no confirmed start date applies for 2026. Companies still file their CT600 corporation tax return and accounts as now. However, if you are a company director who is also a sole trader or landlord above the threshold, MTD ITSA can still apply to that personal income. Keep watching HMRC announcements.
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View company packagesFAQ
What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's initiative requiring businesses and individuals to keep digital tax records and submit updates using compatible software instead of manual returns. It already applies to VAT and is expanding to Income Tax from April 2026.
When does MTD for Income Tax start?
MTD for Income Tax Self Assessment starts in April 2026 for sole traders and landlords with qualifying income over £50,000. The threshold falls to £30,000 from April 2027, with a planned extension to £20,000 after that.
Does Making Tax Digital apply to limited companies?
MTD for VAT applies to VAT-registered companies. MTD for Corporation Tax has been discussed but is not yet mandatory, with no confirmed 2026 start date. Company directors who are also sole traders or landlords over the threshold may still fall under MTD for Income Tax personally.
Do I have to submit updates every quarter under MTD?
Under MTD for Income Tax, yes — you send HMRC a summary of income and expenses each quarter through compatible software, then finalise with a year-end declaration. That is five submissions a year, replacing the single annual Self Assessment return.
What software do I need for MTD?
You need HMRC-recognised, MTD-compatible software — either full bookkeeping software or, for VAT, bridging software that links a spreadsheet to HMRC. Choose a package covering the taxes you need and start using it before your first mandatory period.