Making Tax Digital for Income Tax is now live. Since 6 April 2026, sole traders and landlords with income over £50,000 must keep digital records and send HMRC a quarterly update through approved software, with the first update due by 7 August 2026 and the next by 7 November 2026. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. Your tax payment dates have not changed. If you are over the threshold and have not yet signed up or chosen software, that is the first thing to sort out.
What is Making Tax Digital?
Making Tax Digital (MTD) is a government initiative designed to modernise the UK tax system. It requires individuals and businesses to keep digital records and submit tax information online using approved software. The aim is to reduce errors, improve accuracy and simplify tax compliance.
In time we expect HMRC will use the data to ask taxpayers to make quarterly payments throughout the year, both to reduce the end of year ‘tax bill shock’ which some small businesses face and to provide a cashflow injection to government.
Who Does Making Tax Digital Apply To?
Not every business owner or landlord is affected straight away, but the scope of MTD widens over the next few years. Here is when it applies to you:
- From April 2026: Individuals and landlords with income over £50,000 must comply.
- From April 2027: The threshold drops to £30,000, bringing many more taxpayers into the system.
- From April 2028: The threshold drops again to £20,000.
Why is HMRC Introducing MTD?
MTD isn’t just a new rule for the sake of it. HMRC has set out clear goals for why the change is being rolled out and what they expect it to achieve:
- To reduce mistakes from manual record-keeping and paper returns.
- To collect tax more accurately and in real time.
- To modernise the tax system and reduce the ‘tax gap’.
- To encourage businesses to adopt digital systems for efficiency.
The Key Deadlines
The timetable for Making Tax Digital has shifted several times, but the government has now confirmed the key dates that small businesses and landlords need to prepare for:
- April 2026 – MTD for Income Tax Self Assessment (ITSA) started for those with income over £50,000.
- April 2027 – MTD for ITSA applies to those with income over £30,000, and from April 2028 to those over £20,000.
- MTD for Corporation Tax – expected in future, but no confirmed date yet.
Every quarterly deadline for 2026-27
The quarterly pattern repeats through the year, always due by the 7th of the month following each quarter end. Your tax is then finalised once a year, as now:
| Update | Period covered | Deadline |
| Quarter 1 | 6 April to 5 July 2026 | 7 August 2026 |
| Quarter 2 | 6 July to 5 October 2026 | 7 November 2026 |
| Quarter 3 | 6 October 2026 to 5 January 2027 | 7 February 2027 |
| Quarter 4 | 6 January to 5 April 2027 | 7 May 2027 |
| Final declaration | Full 2026-27 tax year | 31 January 2028 |
Two reassuring details. The updates are cumulative, meaning each one includes everything reported so far, so a mistake in one quarter can simply be corrected in the next. And your tax payment dates have not changed: payments are still due 31 January and, for many, 31 July.
What Records Do You Need to Keep?
One of the biggest changes with MTD is the way records must be kept. Paper files or simple spreadsheets alone will no longer be enough. Taxpayers will need to maintain digital records covering:
- Income and sales records.
- Expense records for allowable deductions.
- Bank transactions (where relevant).
- Digital copies of receipts and invoices.
- Quarterly submissions through HMRC-recognised software.
Comparison: MTD vs Traditional Self-Assessment
| Aspect | Traditional Self-Assessment | Making Tax Digital |
|---|---|---|
| Submission frequency | Annually | Quarterly + Annual |
| Record-keeping | Paper or spreadsheets allowed | Digital records required |
| Software | Optional | Mandatory (HMRC-approved) |
| Error risk | Higher with manual entry | Reduced with automation |
| Cost | Minimal if DIY | Higher (software + accountant fees) |
What Are the Costs of MTD?
For many small businesses and landlords, MTD will raise compliance costs:
- Software subscriptions for HMRC-approved accounting tools (Xero, Sage, Quickbooks etc.).
- Accountant fees for quarterly submissions.
- Time spent learning and updating digital systems. Some estimates suggest costs could rise three to six times compared to traditional self-assessment, especially for those previously filing manually or using spreadsheets.
Benefits of MTD
MTD isn’t just about rules and deadlines — it also brings practical benefits that can make running your business easier.
- Fewer errors in tax returns.
- More accurate tax bills and reduced risk of penalties.
- Easier record-keeping with digital systems.
- Greater visibility of your business finances throughout the year.
- Encourages better financial discipline.
How to Prepare for Making Tax Digital
Getting ready early will save you stress and costs later. Here are the key steps to take now.
- Review whether your income will cross the £50,000 or £30,000 threshold.
- Choose HMRC-approved software early (e.g., Xero, QuickBooks, Sage, FreeAgent).
- Talk to your accountant about how quarterly submissions will work.
- Digitise your receipts and invoices.
- Set aside budget for new costs and training.
- Start practising with quarterly reporting before it becomes mandatory.
Case Study: Paper Records vs Digital Compliance
Jane, a self-employed consultant, has been submitting her self-assessment manually for years. Her income is £55,000, so from April 2026, she must adhere to MTD. She will now need to:
- Subscribe to HMRC-approved software (£20–£30/month).
- Upload receipts and invoices digitally.
- Submit quarterly updates.
Her compliance costs rise, but she also gains real-time visibility into cash flow and avoids late-filing penalties.
Checklist: Are You Ready for MTD?
A quick self-check will help you see whether you’re prepared for the changes.
- Have you checked if your income exceeds the threshold?
- Have you chosen HMRC-approved software?
- Do you know how to digitise receipts and invoices?
- Have you spoken to your accountant about quarterly reporting?
- Have you budgeted for increased costs?
- Have you tested a trial submission?
Common Mistakes to Avoid
Some business owners assume MTD won’t apply to them because they’ve always filed on paper. Others wait until the deadline to adopt digital systems, which often leads to rushed errors. Failing to budget for new costs, neglecting to train yourself or staff on the software and forgetting that quarterly returns are in addition to the annual self-assessment are also common pitfalls.
Final Thoughts
Making Tax Digital marks a major change for small business owners, landlords and self-employed individuals. While it might increase expenses and require new procedures, it also offers opportunities to modernise and enhance financial management. Start early, select the right software and collaborate with your accountant to ensure a smooth transition.