What is Making Tax Digital? Getting ready for MTD

Big changes are coming to how self–employed people and landlords report their income to HMRC. 

You’ve likely already heard the words Making Tax Digital floating around, but if you haven’t had a chance to look into it properly, you’re in the right place. 

We’ve pulled together everything you need to know about Making Tax Digital, what it means for you, and how to get your business ready for it.

In this article:

• What is Making Tax Digital?
• Making Tax Digital for VAT
• Who needs to register for Making Tax Digital?
• When does Making Tax Digital start?
• What to know: Making Tax Digital for landlords
• Making Tax Digital for self-employed people
• How to register for Making Tax Digital

Making Tax Digital for income tax, usually shortened to MTD, is the government’s plan to bring the UK tax system into the digital age. Up until now, doing your taxes has been a bit like saving up a year’s worth of laundry and doing it all in one go before the self–assessment deadline. 

Now, instead of filing one big annual tax return every January (your big pile of laundry), you’ll keep digital records of your income and expenses throughout the year and send short updates to HMRC every quarter using compatible accounting software. In laundry terms: it’s smaller loads, more often, so nothing gets left to pile up, up, and up. 

The goal behind MTD is to make tax more accurate, reduce manual errors, and give both you and HMRC a clearer picture of your finances throughout the year.

The system is already up and running and, in fact, more than 20,000 quarterly updates have been successfully submitted through HMRC’s voluntary testing programme.

The initiative has been rolling out in phases since 2019 and looks like this:

• 2019: VAT–registered businesses making £85,000+ 
• 2022: all VAT–registered businesses
• 2026: corporation tax and income tax for the self–employed and landlords making £50,000+ 
• 2027: all those earning between £30,000 and £50,000
• 2028: all those earning below £30,000

Now that we’re in 2026, MTD is heading towards sole traders and landlords, which is probably why you’re reading this!

If you’re feeling confused or overwhelmed, don’t worry, we’ve got you.

As mentioned, Making Tax Digital for VAT was the first phase of the scheme. MTD for VAT took effect on 1 April 2019 and initially applied to VAT–registered businesses above the £85,000 turnover threshold. 

As of April 2022, all VAT-registered businesses, regardless of turnover, must follow the rules.

If your business is already VAT–registered, this part of MTD isn’t new. 

You’ll already be keeping digital records and filing your VAT (and potentially your taxes) through software like Countingup.

Since the scheme started, the early evidence is encouraging: 55% of businesses said MTD for VAT made preparing and submitting returns faster, and 53% said it made them feel more confident they were getting their tax right. 

The next big phase is Making Tax Digital for income tax. If you’re a sole trader or landlord, this is where you might come into the picture.

The following individuals now need to register for Making Tax Digital:

• Sole traders (self–employed people) with gross income over £50,000
• Landlords (property business owners) with gross income over £50,000

The requirements for Making Tax Digital for income tax are being phased in based on what’s called qualifying income.

What is qualifying income? Qualifying income is your gross income before expenses. 

It’s not your profit or take–home salary. It only includes income from self–employment and property rental. Employment income, pensions, savings interest, and dividends don’t count towards the threshold. Here are the dates when you need to register, based on qualifying income:

• 6 April 2026: qualifying income over £50,000
• 6 April 2027: qualifying income over £30,000
• 6 April 2028: qualifying income over £20,000

If you qualify for MTD, you’re not alone. Around 780,000 sole traders and landlords with income over £50,000 are expected to join MTD from April 2026, and a further 970,000 from April 2027.

Let’s look at a real-world qualifying income scenario:

Case Study: Meet David. David is a freelance graphic designer who also rents out a small flat. In a single tax year, his design business brings in £35,000 and his rental income is £10,000. Because his total qualifying income is £45,000, David doesn’t need to worry about the 2026 deadline, but he will need to be ready to sign up for MTD by April 2027.

If you’re not sure where you stand, HMRC has an online tool to help you check.

The key start date for most people reading this is 6 April 2026. 

This is when Making Tax Digital for income tax becomes a requirement for those with a qualifying income over £50,000. 

Those with income over £30,000 will be enrolled from April 2027, and from 6 April 2028, sole traders and landlords with a qualifying income over £20,000 will also need to use Making Tax Digital for income tax. 

If you’re a sole trader or landlord, HMRC will review your self–assessment tax return and write to you if they identify that you need to start using MTD. 

But you don’t have to wait for that HMRC letter. If you’re ready to get ahead of the deadline, and you know you’re over the threshold, you can sign up for MTD straightaway.

If you own rental property in your own name, rather than through a limited company, MTD is coming your way. Here’s what you need to know about your responsibilities under the new system.

The first thing you’ll need to do under MTD is make sure whatever system you use to track your income and outgoings is HMRC–compatible.

You’ll need to keep digital records of all your rental income and expenses throughout the tax year. This means logging things as you go, rather than catching up in a rush at the end of the year. 

Good to know: MTD applies to all your rental income sources — UK residential or commercial property, furnished holiday lets (these have been treated as standard property income since April 2025), and overseas properties all need to be tracked and reported. You need to keep separate digital records for your UK and overseas properties.

Four times a year, you’ll send a summary of your income and expenses to HMRC using your compatible accounting software. These quarterly updates aren’t full tax returns but snapshots of how your rental income and expenses look for that period.

The quarterly update deadlines are fixed:

• 7 August (6 April–5 July)
• 7 November (6 July–5 October)
• 7 February (6 October–5 January)
• 7 May (6 January–5 April)

Once your records are up to date, your software generates the summary and submitting it to HMRC should only take a few minutes.

At the end of the tax year, you’ll submit a final declaration by 31 January — the same deadline you’ll recognise from self–assessment. 

This is where you confirm your total income from all sources, claim any reliefs or allowances you’re entitled to, and finalise your tax bill for the year.

Your quarterly updates throughout the year mean the numbers are largely in order by the time 31 January comes around. Good news if you’re usually scrambling to submit your tax return at the end of January!

If you jointly own a rental property with someone else, like a partner, spouse, or family member, here’s the key thing to know: HMRC looks at your individual share of the income, not the total.

For example: if you own a property jointly with another person, the gross income will be halved (this is assuming you own the property 50/50).

So if your property brings in £80,000 a year and you own it equally with your partner, your qualifying income from that property is £40,000, not £80,000. 

Whether that takes you over the MTD threshold depends on your individual total, which includes any self–employment income you have.

In summary: each joint owner manages their own MTD submissions based on their share. There’s no joint submission. You each handle your own side of things.

Yes. If you’re a UK resident landlord who earns rental income from properties overseas, that income counts towards your qualifying income for MTD purposes. 

For example: if you own a holiday villa in Spain or a flat in Lisbon, this property gets included in the calculation. If you own rental properties in both the UK and overseas, each property needs to have its own digital records, and you need to submit a separate quarterly report for each property.

For non–UK resident landlords, there is a slight difference:

• Non–UK residents with a National Insurance number will only be required to do MTD submissions from April 2027, even if your gross qualifying income is above £50,000 in 2026/27
• Non–UK residents without a National Insurance number will not be required to do MTD submissions. You must continue to declare your UK rental income on your annual UK self–assessment tax return

If you’re a sole trader, the same MTD rules apply to you as they do to landlords — as do the same income thresholds. 

This means: from April 2026, if your gross self-employment income (or combined self-employment and rental income) is over £50,000, you’ll need to keep digital records and submit quarterly updates using MTD–compatible software.

If you’re not sure what software to use, GOV.UK has a handy tool to help you find software that works for Making Tax Digital for income tax. Popular options include Xero, Clear Books, QuickBooks and Capium.

If you have both self–employment and rental income, your sole trader income is added to your gross rental income to decide if you’re required to use MTD for income tax.

So, even if neither source of income alone pushes you over the threshold, the combined total might. If you’re not sure, it’s worth checking if you need to use the service before you assume you’re not affected.

Let’s take a closer look at your MTD responsibilities if you’re self–employed.

If you’re self–employed, you’re probably already used to tracking invoices, expenses, and storing receipts in your desk drawer. But under MTD, you need to log everything in HMRC–compatible accounting software.

Sounds complicated, but it’s not. Most MTD software lets you log income and expenses on the go. So whether you’ve just invoiced a client or paid for a business lunch, you can record it there and then. Which you probably already do.

The categories you’re working with are straightforward: money coming into your business, and legitimate business costs going out.

It’s a good idea to get into the habit of logging everything in your software as you go. The more up–to–date your records are throughout the year, the less work there is when a quarterly deadline rolls around.

Every quarter, your software will pull together a summary of your business income and expenses and send it to HMRC. 

It sounds more daunting than it is. If your records are ticking along nicely, the submission itself won’t take more than a few minutes.

The four quarterly update deadlines are:

• 7 August (6 April–5 July)
• 7 November (6 July–5 October)
• 7 February (6 October–5 January)
• 7 May (6 January–5 April)

These updates don’t calculate your tax bill – that comes later. Think of them as regular check–ins that keep HMRC in the loop throughout the year..

Once the fourth quarter is done, you’ll wrap up the year with your final declaration, due by 31 January. 

This is the stage where everything comes together: you confirm your total income from all sources, add anything that doesn’t go through your quarterly updates (like savings interest), claim your allowances and reliefs, and agree your final tax bill.

For most sole traders, the final declaration will feel much less involved than the old self-assessment return. By January, the bulk of your information is already sitting in your software, organised and ready to go.

No, not once you’re signed up for Making Tax Digital. 

As mentioned, the final declaration replaces your self–assessment tax return. 

MTD just means that the process is spread more evenly across the year, rather than saved up until the end.

And if you’re nervous about the transition, there’s a helpful cushion built in: if you’re joining MTD for income tax in April 2026, you won’t receive penalty points for late quarterly updates for the first 12 months. Win!

But (there’s always a but) if you submit your final declaration late, you may have to pay a fine.  

If you’re required to use Making Tax Digital for income tax from 6 April 2026, it’s a good idea to register sooner rather than later, so you’re ready to go.

What you’ll need:

• A Government Gateway account: you will already have one if you’ve been filing self–assessment tax returns. If not, you can set this up as part of the registration process
• MTD–compatible software: HMRC doesn’t provide this, but there are plenty of options out there, from full accounting packages to bridging software. Bridging software is a digital link between programs like Excel or Google Sheets and HMRC. It’s a good option if you want to keep using your existing spreadsheets. Bridging software providers include 123 Sheets, Absolute Excel VAT Filer, and QuickBooks
• Your details: This includes your National Insurance number and Unique Taxpayer Reference (UTR)

If you’re a sole trader:
Before you sign up, note that you’ll still need to submit a self–assessment tax return for the tax year before you start using Making Tax Digital for income tax. To be eligible to sign up, you must:

• Be registered for self–assessment
• Have submitted a tax return in the last two years

Once you’re ready, here are the steps:

1. Use HMRC’s online tool to check if and when you need to sign up
2. Choose your MTD–compatible software (or use HMRC’s software finder tool)
3. Sign up for MTD through HMRC’s online service
4. Start keeping digital records — the earlier the better

If you’re a landlord
The sign-up process is the same as for sole traders, with one important difference: you need to register for each of your rental businesses separately. 

When you go through the process, you need to provide:

• The date you started your business or the date you started receiving property income (if this is within the last 2 tax years)
• The tax year you will start using Making Tax Digital for income tax

If an accountant manages your business accounts, they can handle the registration on your behalf, but the process is designed to be as straightforward as possible.

You can also check out our guide on how to sign up for MTD for more information, which includes details on MTD exemptions and the benefits of early registration. 

Making Tax Digital for income tax is a significant shift away from the familiar tax system for sole traders and landlords. 

There are more touchpoints, like the quarterly updates, throughout the year, but try to see it as a chance to feel more on top of your finances than ever before. 

If you haven’t already got one, it’s worth opening a dedicated business current account to keep your income and expenses even more organised. It means your records are already in good shape when it’s time to submit a quarterly update to HMRC. 

And if you’re just getting started or thinking about setting up your business more formally, company registration is a great first step. With Countingup, our company formation experts handle the Companies House application for you, and your new limited company will be up and running within 24 hours. 

In the meantime, best of luck with MTD, you’ve got this. 

Not at this stage. Making Tax Digital for income tax currently applies to: sole traders and landlords who own property personally. If your rental income comes through a limited company, you’ll pay corporation tax rather than income tax, and the rules currently apply only to individuals, not limited companies. Keep an eye on future updates.

It depends on your total qualifying income. HMRC adds together all your gross income from self-employment and rental property — regardless of which is your main source. Income from employment (PAYE) or a pension is not included in the qualifying income calculation — it’s only self-employment and rental income that count. 

You’ll submit four quarterly updates throughout the year — one per quarter — plus one final declaration by 31 January. That’s five submissions in total, replacing the annual self–assessment return. The software you use generates a summary to send to HMRC once your income and expenses are recorded.