Question 1

What is Making Tax Digital?

Accepted Answer

Making Tax Digital (MTD) is HMRC's programme that requires UK taxpayers to keep digital records and submit tax information to HMRC using compatible software, instead of using paper records or the old online tax return form. It already applies to all VAT-registered businesses and is being extended to self-employed people and landlords through MTD for Income Tax (MTD ITSA) from April 2026.

Question 2

What is MTD for Income Tax?

Accepted Answer

MTD for Income Tax (officially Making Tax Digital for Income Tax Self Assessment, or MTD ITSA) is the version of MTD that applies to sole traders and landlords. From 6 April 2026 anyone with combined self-employment and/or property income above £50,000 must keep digital records, send quarterly updates to HMRC, and submit a final declaration each tax year using MTD-compatible software.

Question 3

Who needs Making Tax Digital?

Accepted Answer

You need MTD if you are: (1) a VAT-registered business — already mandatory; or (2) a sole trader or landlord with qualifying income above £50,000 from April 2026, above £30,000 from April 2027, or above £20,000 from April 2028. Qualifying income is your gross self-employment turnover plus gross property income, before expenses.

Question 4

Do I need to use Making Tax Digital?

Accepted Answer

If your combined self-employment and property income is above the threshold for the relevant tax year (£50k from April 2026, £30k from April 2027, £20k from April 2028), then yes — using MTD-compatible software is mandatory. If you are below the threshold, MTD ITSA is currently voluntary. VAT-registered businesses are already required to use MTD for VAT.

Question 5

When does Making Tax Digital start?

Accepted Answer

MTD for VAT has been mandatory for all VAT-registered businesses since April 2022. MTD for Income Tax begins on 6 April 2026 for sole traders and landlords with qualifying income above £50,000. It then extends to those over £30,000 from April 2027, and over £20,000 from April 2028.

Question 6

When does Making Tax Digital start for landlords?

Accepted Answer

Landlords with gross rental income above £50,000 (combined with any self-employment income) must join MTD for Income Tax from 6 April 2026. Landlords above £30,000 join from April 2027, and above £20,000 from April 2028. The thresholds look at gross rental income, before mortgage interest or other expenses.

Question 7

When does Making Tax Digital start for sole traders?

Accepted Answer

Sole traders with self-employment turnover above £50,000 (combined with any rental income) must use MTD for Income Tax from 6 April 2026. The threshold drops to £30,000 from April 2027, and £20,000 from April 2028.

Question 8

How does Making Tax Digital work?

Accepted Answer

Under MTD you (1) keep digital records of your business income and expenses in compatible software, (2) send a quarterly update summarising income and expenses to HMRC for each business and property source, and (3) submit a final declaration after the tax year end to confirm your full tax position and pay any tax due. All submissions go to HMRC directly through the software.

Question 9

How do I register for Making Tax Digital?

Accepted Answer

You sign up through GOV.UK using your Government Gateway account, then authorise your MTD-compatible software to connect to HMRC. For MTD for Income Tax you need an HMRC online account, a National Insurance number, and details of your self-employment or property income. An accountant can sign you up on your behalf via their agent services account.

Question 10

How do I prepare for Making Tax Digital?

Accepted Answer

Start by checking whether you'll be in scope and when. Then choose MTD-compatible software (or bridging software for spreadsheets), set up a digital bookkeeping routine, separate business and personal bank accounts if you haven't already, and consider running a parallel quarter before mandation so you understand the workflow before it becomes compulsory.

Question 11

How do quarterly updates work under Making Tax Digital?

Accepted Answer

Each tax year you submit four quarterly updates per income source (one per business and one per property portfolio). Each update shows totals of income and expenses for the quarter. Standard quarter end dates are 5 July, 5 October, 5 January and 5 April, with submission deadlines of 7 August, 7 November, 7 February and 7 May. You can elect for calendar quarters (quarters ending 30 June, 30 Sept, 31 Dec, 31 March) instead.

Question 12

How many tax returns do I file under Making Tax Digital?

Accepted Answer

You don't file a traditional Self Assessment tax return once you're in MTD ITSA. Instead you submit four quarterly updates per income source plus one final declaration per tax year, which together replace the SA100 return. The final declaration covers all your income and is the equivalent of finalising your tax position.

Question 13

What records do I need to keep for Making Tax Digital?

Accepted Answer

You must keep digital records of all business income and expenses, including the date, amount, and category of each transaction. For VAT, you also need to keep details of supplies made and received. Records must be kept in 'functional compatible software' — anything from full bookkeeping software to spreadsheets combined with bridging software. Paper-only records no longer satisfy the rules once you're in MTD.

Question 14

What software do I need for Making Tax Digital?

Accepted Answer

You need HMRC-recognised MTD-compatible software. Options include full bookkeeping platforms (such as FreeAgent, Xero, QuickBooks, Sage), specialist MTD ITSA tools, or spreadsheets connected to bridging software. HMRC publishes a list of recognised software on GOV.UK. The right choice depends on the volume of transactions, whether you have an accountant, and your budget.

Question 15

Can I opt out of Making Tax Digital?

Accepted Answer

You cannot opt out simply because you prefer paper. However, HMRC grants exemptions where it's not reasonably practicable to use digital tools — for example, on grounds of age, disability, location (no reliable internet), or religion. Exemption is decided case by case and you have to apply to HMRC. You can also fall back below the threshold and exit MTD that way.

Question 16

What happens if I do not comply with Making Tax Digital?

Accepted Answer

Non-compliance triggers HMRC's points-based penalty system. You receive a penalty point for each missed quarterly update or final declaration; once you reach the threshold (4 points for quarterly filers) a £200 fine applies, with further £200 fines for each subsequent default. Late payment of tax also attracts interest and percentage-based penalties. HMRC has confirmed a soft-landing approach for late quarterly updates in the first 12 months for the April 2026 cohort.

Question 17

Does Making Tax Digital replace Self Assessment?

Accepted Answer

MTD ITSA replaces the annual SA100 Self Assessment tax return for those in scope. You no longer file a single year-end return; instead you file quarterly updates and a final declaration through software. Self Assessment as a tax system still exists — what changes is how and when you report.

Question 18

Does Making Tax Digital apply to limited companies?

Accepted Answer

Not yet. MTD currently covers VAT (all VAT-registered entities including companies) and Income Tax for sole traders and landlords. MTD for Corporation Tax was previously announced but has no confirmed start date and is not a near-term priority for HMRC. Limited companies still file their CT600 the existing way.

Question 19

Does Making Tax Digital apply to partnerships?

Accepted Answer

General partnerships were originally in scope for MTD ITSA but their start date has been deferred and not yet announced. Partnerships still need to file the SA800 partnership return for now. Limited Liability Partnerships (LLPs) and other complex partnerships are also outside the initial MTD ITSA rollout.

Question 20

Does Making Tax Digital apply to pensioners?

Accepted Answer

Pension income on its own is not within MTD ITSA — it's reported through PAYE or Self Assessment as today. However, if you're a pensioner who also has self-employment or rental income above the qualifying-income threshold, the rental and self-employment side falls within MTD ITSA from the relevant date.

Question 21

Does Making Tax Digital apply to landlords?

Accepted Answer

Yes. UK and overseas property income counts towards qualifying income for MTD ITSA. Once your combined gross rental and self-employment income exceeds the threshold for the year, you must use MTD-compatible software for your property business. Furnished holiday lets and jointly-owned property have specific rules within the regime.

Question 22

Does Making Tax Digital apply to side income?

Accepted Answer

It depends on the source and amount. Trading or self-employment side income, plus property income, both count towards your qualifying income. If the combined gross figure exceeds the threshold for the tax year, MTD applies — even if it's a side hustle on top of a PAYE job. PAYE salary itself is not counted.

Question 23

Does Making Tax Digital apply if I have a job and rental income?

Accepted Answer

Your PAYE salary doesn't count towards the qualifying-income threshold, but your gross rental income does. So if you have a salaried job and rental income above £50,000 from April 2026 (or £30k from 2027, £20k from 2028), MTD ITSA applies to the rental side. Your employment income continues to be reported through PAYE as today.

Question 24

What is the Making Tax Digital deadline?

Accepted Answer

The headline Making Tax Digital deadline is 6 April 2026 — when MTD for Income Tax becomes mandatory for sole traders and landlords with qualifying income above £50,000. The MTD deadline 2027 is 6 April 2027 (£30,000 threshold) and the MTD deadline 2028 is 6 April 2028 (£20,000 threshold). MTD for VAT has been mandatory for all VAT-registered businesses since April 2022.

Question 25

What is the Making Tax Digital start date?

Accepted Answer

The MTD ITSA start date is 6 April 2026 for the £50,000+ band, 6 April 2027 for £30,000+, and 6 April 2028 for £20,000+. The Making Tax Digital income tax start date is the first day of the relevant tax year (6 April), not the first day of your accounting year.

Question 26

When is the first MTD quarterly update deadline?

Accepted Answer

For the April 2026 cohort, the first MTD quarterly update deadline is 7 August 2026, covering the period 6 April – 5 July 2026. After that, quarterly update deadlines are 7 November, 7 February and 7 May each year.

Question 27

What are the MTD quarterly deadlines for 2026 and 2027?

Accepted Answer

MTD quarterly deadlines 2026: 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. MTD quarterly deadlines 2027: 7 August 2027, 7 November 2027, 7 February 2028 and 7 May 2028. The same four submission dates apply each tax year.

Question 28

What are the Making Tax Digital thresholds?

Accepted Answer

MTD for Income Tax has three thresholds based on qualifying income: £50,000 from 6 April 2026, £30,000 from 6 April 2027 and £20,000 from 6 April 2028. MTD for VAT applies to all VAT-registered businesses with no minimum turnover.

Question 29

What counts as qualifying income for MTD?

Accepted Answer

Qualifying income for MTD is your combined gross self-employment turnover plus gross UK and overseas property rental income, before expenses. It does not include PAYE salary, dividends, savings interest, pensions or capital gains. The test uses gross income, not profit.

Question 30

Is Making Tax Digital based on gross income or profit?

Accepted Answer

MTD thresholds are based on gross income (turnover and gross rents) before any expenses, not on taxable profit. A landlord with £55,000 of gross rent and a £10,000 profit after mortgage interest is still inside the £50,000 band from April 2026.

Question 31

What is the rental income threshold for Making Tax Digital?

Accepted Answer

There is no separate rental income threshold for MTD — gross rental income is added to gross self-employment income and tested against £50k (from 2026), £30k (from 2027) or £20k (from 2028). A landlord with £35,000 of gross rents joins MTD from April 2027.

Question 32

What is the self-employed income threshold for Making Tax Digital?

Accepted Answer

The self-employed income threshold for MTD is the qualifying-income threshold for the relevant tax year: £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028. It uses gross trading turnover plus any rental income you also have, not profit.

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