Making Tax Digital Thresholds: When Does MTD Apply to Your Business?

Yes, if you are VAT-registered. MTD for VAT became mandatory for all VAT-registered businesses on 1 April 2022. Before that date only businesses above the VAT threshold had to comply. The gateway is the VAT registration threshold: £90,000 in taxable turnover over a rolling 12-month period.

What MTD for VAT compliance requires:

• Keep VAT records in functional compatible software (not paper, and not a standalone spreadsheet without bridging software)
• Maintain digital links between systems — manually copying figures violates the rules
• Submit returns directly via your software, not by typing into HMRC’s portal

Full MTD for VAT guide →

MTD for Income Tax (MTD ITSA) applies to sole traders and landlords registered for Self Assessment whose qualifying income exceeds a set threshold:

HMRC uses your Self Assessment returns to determine which phase you’re in. HMRC will write to businesses in scope, but receiving no letter does not mean you’re exempt — you must check your own eligibility. You cannot sign up for MTD ITSA until after your first Self Assessment return is submitted.

Qualifying income is your combined income from self-employment and property. It is not your total income. Salary, pension, savings interest and dividends do not count.

Example: A freelance consultant earning £35,000 from clients and £18,000 from a rental property has qualifying income of £53,000 — in the first phase, so MTD ITSA is mandatory from 6 April 2026.

Sole traders and landlords with qualifying income above £50,000 are the first cohort. Before your start date you need to:

1. Choose MTD ITSA-compatible software and get it set up
2. Begin keeping digital records of income and expenses
3. Submit your 2024/25 Self Assessment return in the normal way
4. Sign up for MTD ITSA with HMRC after that return is filed
5. Start submitting quarterly updates from April 2026 onwards

Getting software in place a year early is far less disruptive than switching weeks before you’re legally required to comply.

A summary of your business income and expenses for a three-month period, sent through your MTD software. Not a full tax return; no tax payment triggered. Four updates per year (Apr-Jun, Jul-Sep, Oct-Dec, Jan-Mar), then a final declaration at year-end that consolidates them plus any other income. The final declaration replaces the annual Self Assessment return.

Landlords face the same thresholds and rollout dates as self-employed sole traders. If your rental income (alone or combined with self-employment) exceeds the relevant threshold, MTD ITSA applies on the same timetable. UK residential and commercial letting income counts. For multiple properties, all income combines for the calculation.

Limited companies face two separate questions. If VAT-registered, MTD for VAT applies now. For corporation tax, HMRC’s consultation closed in March 2021 but no mandatory date is set. A voluntary pilot runs but no company is required to use it. The practical step is to use accounting software that already supports MTD for VAT — you’ll be in good position when MTD for CT arrives.

MTD for limited companies →

HMRC grants exemptions in narrow circumstances:

• Digital exclusion: disability, age-related factors, or genuine lack of reliable internet at your trading location
• Religious grounds: using electronic communications incompatible with the religious beliefs of a practising member of that faith
• Insolvency: business subject to formal insolvency proceedings

Age alone is not sufficient. An exemption from MTD does not remove the requirement to file — you still submit returns by the usual methods.