Making Tax Digital Glossary
Plain-English definitions of the Making Tax Digital and HMRC terms used across this site.
- Making Tax Digital (MTD)
- HMRC's programme to digitise UK tax record-keeping and reporting. Taxpayers in scope must keep digital records and submit to HMRC using compatible software. What is Making Tax Digital? →
- MTD ITSA
- Making Tax Digital for Income Tax Self Assessment. Applies to sole traders and landlords above qualifying income thresholds from April 2026. MTD ITSA explained →
- MTD for VAT
- The VAT version of MTD, mandatory for all UK VAT-registered businesses since April 2022. MTD for VAT →
- Qualifying income
- Gross income from self-employment and/or UK property, before expenses. Used to determine when you must join MTD ITSA. MTD thresholds →
- Quarterly update
- A summary of business income and expenses submitted to HMRC every three months under MTD ITSA. Quarterly updates explained →
- Tax return under MTD
- The Self Assessment tax return that an in-scope person completes and submits through MTD-compatible software after the tax year. It includes final business figures and other taxable income and gains. MTD for Income Tax →
- Bridging software
- Software that links spreadsheets to HMRC so spreadsheet users can comply with MTD without switching to a full bookkeeping package. Bridging software guide →
- Compatible software
- Software on HMRC's recognised list that can keep digital records and submit MTD data directly to HMRC. Best MTD software →
- Digital records
- Records of income and expenses captured and stored electronically in MTD-compatible software from the point of transaction.
- Digital links
- An unbroken electronic flow of data between software products. Manual re-typing or copy/paste between systems breaks the digital link.
- Government Gateway
- HMRC's online identity service used to access MTD, Self Assessment and other tax services. How to register →
- Agent Services Account (ASA)
- The HMRC account used by accountants and tax agents to act on behalf of clients under MTD. MTD for accountants →
- Penalty points
- HMRC's late-submission system. Each missed MTD deadline adds a point; reaching the threshold triggers a £200 penalty. MTD penalties →
- Exemption
- An HMRC-approved release from MTD obligations, granted on grounds such as digital exclusion, age, disability or religion. MTD exemptions →
- Cash basis
- An accounting method where income and expenses are recorded when money is received or paid. The default for most sole traders under MTD ITSA.
- Accruals basis
- An accounting method that records income and expenses when they are earned or incurred, regardless of payment date.
- Self Assessment
- The UK system used to report taxable income and gains. It continues under MTD for Income Tax, but in-scope people also keep digital records, send cumulative quarterly updates and submit their tax return through compatible software.