What Is Making Tax Digital?

Making Tax Digital was first announced by HMRC in 2015 as part of a long-term programme to digitise the UK tax system. The aim is to reduce errors, improve accuracy and give taxpayers a clearer real-time view of their tax position. MTD has been rolled out in phases beginning with VAT.

MTD for VAT was the first phase, becoming mandatory for most VAT-registered businesses in April 2019 and extended to all VAT-registered businesses in April 2022. It requires digital record-keeping and VAT return submission through compatible software.

MTD for Income Tax Self Assessment (MTD ITSA) starts in April 2026 for sole traders and landlords with qualifying income above £50,000. Affected taxpayers must keep digital records, submit four quarterly updates per year, and file a final declaration at year end (replacing the traditional Self Assessment return).

HMRC has previously consulted on extending MTD to limited companies through MTD for Corporation Tax, but no mandatory start date has been confirmed and the programme is not currently a near-term priority.

HMRC introduced MTD to reduce the tax gap caused by avoidable errors, modernise reporting processes, and improve the experience of managing tax for individuals and businesses.

For affected taxpayers, MTD means moving away from paper records and the annual Self Assessment return towards continuous digital record-keeping and quarterly digital reporting. Compatible software is mandatory.