Making Tax Digital for Income Tax FAQs
Making Tax Digital is HMRC’s move to digital record-keeping and quarterly reporting. This guide explains who is affected, what’s changing and how to stay compliant.
Making Tax Digital, often shortened to MTD ITSA, is HMRC’s move towards a fully digital tax system. It changes how you keep records and how certain taxes are reported.
The aim is straightforward. HMRC wants businesses and individuals to keep up-to-date digital records to reduce the mistakes that come with using manual systems or retyping figures into online forms.
The change can be straightforward too. We’ve created this guide to demystify what’s happening and when you need to take action.
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Making Tax Digital for Income Tax changes how you keep records and report income to HMRC.
If it applies to you, you’ll need to:
Keep your income and expenses in digital software
Send HMRC a short update every three months
Confirm your final figures at the end of the tax year (as you do now)
You can read HMRC’s guidance here.
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Making Tax Digital for Income Tax applies to people who earn income from:
Self-employment as a sole trader
UK property as a landlord
If you run your business through a limited company and take salary or dividends, that income continues under PAYE and Corporation Tax rules.
However, if you’re a director and also have personal rental income or separate sole trader income, that income could come under MTD ITSA if it’s above the threshold (see ‘When does Making Tax Digital for Income Tax start?’ for details of these).
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Making Tax Digital for Income Tax is being introduced in stages.
From April 2026 if your income is over £50,000
From April 2027 if it’s over £30,000
From April 2028 if your income is over £20,000
It’s important to note that the income figure you need to report is your total before expenses:
You have the option of signing up voluntarily if your income is under £20,000, or signing up before you’re required to so you can get a head start.
Read our dedicated article ‘When will I need to start Making Tax Digital?’ -
No. We’ll still need to confirm your tax position at the end of the year. The difference is that you’ll send simple updates every three months instead of doing everything in one go in January.
For many people, that means less stress and better visibility throughout the year.
At year end, we’ll check and confirm the final numbers, and submit your Self-Assessment Tax Return as normal.
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You’ll need to send HMRC your income figure every three months. By default, the quarters run from:
6 April to 5 July
6 July to 5 October
6 October to 5 January
6 January to 5 April
After each quarter ends, you have one month to submit the update.
You can also choose calendar quarters instead:
1 April to 30 June
1 July to 30 September
1 October to 31 December
1 January to 31 March
Whichever option you use, the rule is the same: once the quarter ends, you have a month to submit your figures.
Each update is simply a summary of your total income and total expenses for that period. If your bookkeeping is kept up-to-date, sending the update should be straightforward.
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No. This is purely about reporting rather than changing payment dates. The current Self-Assessment payment deadlines still apply.
You can check on those deadlines here.
The benefit of this is that, when you see your numbers every few months, you can be more proactive with your tax planning. You can then set the correct money aside, instead of guessing or finding there’s a shortfall.
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It simply means keeping your records in software instead of on paper. You’ll need to record:
What you earned
What you spent
When it happened
Cloud accounting software makes this easier and gives you a live view of profit and tax as you go.
If you’d prefer to use a spreadsheet, it must link properly to submission software. We can help you do this, or complete the upload on your behalf.
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You’ll need software that can:
Store your income and expenses
Send quarterly updates to HMRC
Submit your final figures
We use Xero in our practice but there are many others. HMRC has a full list of suppliers here.
If you already use cloud accounting software you’re likely to be ready to go, but double-check with your provider if you’re unsure.
Read our dedicated article ‘What software do I need for Making Tax Digital?’
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MTD for Income Tax uses a points-based penalty system for late submissions, with points building up over time.
For every missed submission you receive one penalty point
Once you reach the threshold of four points, HMRC charges a £200 penalty
You’ll receive another £200 penalty for each further missed deadline
Points stay on your record until you meet the reset conditions. To reset your points, you must:
Submit all required returns
Stay fully compliant for a set period
HMRC’s full guidance on these penalties is here.
If you’re worried about deadlines, we can handle your MTD ITSA submissions for you. That way you know they’re filed correctly and on time, without the stress.
Read our dedicated article ‘Making Tax Digital penalties and compliance” -
Beyond meeting the rules, there are real upsides:
Fewer manual mistakes
Clearer visibility of your profit
Earlier awareness of your tax bill
Proactive pension and tax planning
Less pressure in January
When your numbers are live, tax becomes something you can manage throughout the year rather than something you deal with at the last minute.
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We recommend starting simple:
Check your income level
Confirm when you’ll be included
Review how you currently keep records
Move to compatible software if needed
This isn’t just a compliance change. It’s an opportunity to get clearer on your numbers and make tax planning part of your routine.
We’ve created a handy MTD ITSA checklist for our clients. You can download it here.
We’ve created a practical checklist to help UK business owners prepare for Making Tax Digital and keep their records compliant.
Need help getting ready for the change?
As well as being a process change, Making Tax Digital for Income Tax is also a chance to strengthen how you manage your tax.
If you’d like clarity on whether MTD ITSA affects you and how to set things up properly, get in touch. We’ll guide you through it and make sure your system supports both compliance and better tax planning.