Making Tax Digital (MTD): What it Means for You
Making Tax Digital changes how self‑employed individuals keep records and report information to HMRC. It requires you to keep digital records of your income and expenses and use HMRC‑compatible software to send updates to HMRC during the year, rather than relying on paper records or submitting everything at the end of the tax year.
For most people, the goal is simple: fewer errors, less stress at year’s end, and a clearer picture of what’s going on in your business as you go.
MTD already applies to all VAT-registered businesses. VAT‑registered businesses must keep VAT records digitally and submit VAT Returns using MTD‑compatible software.
MTD for Income Tax (for sole traders and landlords) starts in phases.
If your gross income (so before expenses) from self‑employment and/or property is over £50,000, you’ll be required to use MTD for Income Tax from 6 April 2026.
HMRC’s current rollout plan then extends this to those over £30,000 from 6 April 2027, and over £20,000 from 6 April 2028.
If you’re in scope for MTD for Income Tax, you’ll keep digital records in compatible software (like Xero or Freeagent) and send HMRC quarterly updates (summaries) during the year, then confirm your final position as part of the usual annual process.
This doesn’t mean you suddenly pay your tax four times a year — it’s about reporting little-and-often, so you’re not scrambling at the deadline.
If you’ve received a letter from HMRC about MTD, please let us know as soon as possible. A letter usually means HMRC believes you’re likely to be in scope and is expecting you to prepare and comply by your start date.
What You Must Do To Be Compliant
If you’re in scope for MTD for Income Tax, compliance typically means:
Sign up for MTD for Income Tax (HMRC won’t automatically sign everyone up; they contact you, and you/your agent must complete the sign‑up).
Keep digital records of your self‑employment and/or property income and expenses using MTD‑compatible software.
Send quarterly updates to HMRC for each self‑employment and property income source, using that software.
Send an update even if there was no income/expense in the period (you still need to file the quarterly update).
Do your year-end submission/finalisation through software (HMRC describes this as submitting your return/finalising your Income Tax position through the MTD process).
A helpful practical point: quarterly updates are based on totals from the digital records, and HMRC says you don’t need to make accounting/tax adjustments before sending the quarterly update (adjustments happen when finalising).
For taxpayers mandated from 6 April 2026, HMRC’s MTD campaign timeline lists:
Start keeping records in MTD software: 6 April 2026
First quarterly update deadline: 7 August 2026
(Then the next deadlines in that first year are 7 November 2026, 7 February 2027, and 7 May 2027.)
We’ll make this as smooth and practical as possible. We typically use FreeAgent or Xero to keep everything tidy, compliant, and easy for you to understand, and we’ll recommend the best setup based on how you run your business. (If you already use software, we can review what you have and make sure it’s MTD‑ready.)
Making Tax Digital for the Self-Employed
If you are self-employed, making tax digital for self-employed means you will need to keep digital records of all your business income and expenses using MTD-compatible software. You will also need to send four quarterly updates to HMRC each year, plus a final declaration at year's end.
If your gross income from self-employment is over 50,000, this applies to you from 6 April 2026. If it is over 30,000, your start date is 6 April 2027.
We work with many self-employed clients across Scotland and the UK, and we can help you get set up, stay compliant, and understand exactly what you need to do and when.
Making Tax Digital for Landlords
If you're a buy-to-let property owner and your gross income from property is over 50,000, making tax digital for landlords applies to you from 6 April 2026. The threshold drops to 30,000 from 6 April 2027 and 20,000 from 6 April 2028.
This means you will need to keep digital records of your rental income and expenses using MTD-compatible software, and submit quarterly updates to HMRC through that software. For landlords using FreeAgent or Xero, the process is straightforward. We can help you set up the right system, make sure it is configured correctly, and handle the submissions on your behalf.
Making Tax Digital for Small Businesses
Making tax digital for small businesses already applies to VAT-registered businesses. If you are VAT-registered, you are already required to keep digital VAT records and submit VAT returns through MTD-compatible software.
For Income Tax, the rollout affects smaller businesses on a phased basis, depending on income. If your business is approaching the 50,000, 30,000, or 20,000 thresholds, now is a good time to start preparing before HMRC contacts you.
Making Tax Digital Deadlines
Here is a quick summary of the current Making Tax Digital deadlines:
6 April 2026: MTD for Income Tax applies to sole traders and landlords with gross income over 50,000
6 April 2027: Extends to those with gross income over 30,000
6 April 2028: Extends to those with gross income over 20,000
7 August 2026: First quarterly update deadline for those mandated from April 2026
MTD for VAT: Already in effect for all VAT-registered businesses
If you are unsure which date applies to you or what your gross income looks like against the threshold, get in touch, and we will confirm your position.
How to Prepare for Making Tax Digital
The best time to start preparing is before HMRC contacts you. Here is what we recommend:
Check whether your income is likely to be above the relevant threshold in the next tax year.
Choose MTD-compatible software. We typically use FreeAgent or Xero, and we can help you pick the right one for your situation.
Start keeping digital records now, even if your mandate date is still a year or two away. It is easier to build the habit early.
Sign up for MTD for Income Tax once HMRC contacts you, or ask us to do it on your behalf as your agent.
If you have received a letter from HMRC about MTD, please forward it to us as soon as you can. We will confirm what it means for you and make sure everything is in place before your start date.
Frequently Asked Questions About Making Tax Digital
When Does Making Tax Digital for Income Tax Start?
MTD for Income Tax starts from 6 April 2026 for sole traders and landlords with gross income over £50,000. It extends to those with income over £30,000 from 6 April 2027, and over £20,000 from 6 April 2028. If you are not sure which date applies to you, get in touch, and we will confirm your position.
Do I Have to Use Specific Making Tax Digital Software?
You need to use HMRC-recognised MTD-compatible software, but you do have a choice of provider. We typically use FreeAgent or Xero for our clients, as both are fully MTD-ready and straightforward to use. We can help you choose the right one and get set up before your start date.
What Happens if I Miss a Making Tax Digital Quarterly Update Deadline?
HMRC operates a points-based penalty system for late quarterly updates under MTD. You accumulate a penalty point for each missed deadline, and once you reach the threshold, a financial penalty is charged. Staying on top of quarterly submissions is important. We manage this for our clients so nothing is missed.
I Have Received a Letter From HMRC About MTD. What Should I Do?
Forward it to us as soon as you can. A letter from HMRC about Making Tax Digital usually means they believe you are in scope and are expecting you to act before a specific date. We will review it, confirm what it means for you, and put a plan in place so you are covered.
Not Sure if Making Tax Digital Applies to You?
We help sole traders, landlords, and small businesses across Scotland and the UK understand exactly where they stand with MTD. Whether you have received a letter from HMRC, you are approaching one of the income thresholds, or you simply want to get ahead of the change, we can help.
Here’s What We Can Do for You:
Confirm whether making tax digital applies to you and from which date, based on HMRC's thresholds and your income sources
Get you set up on MTD-compatible software and show you a simple routine to follow each week or month
Handle the quarterly submissions on your behalf, or support you to do them confidently, and keep you on track throughout the year
Book a free consultation with Annja today, and we will translate everything into plain English, confirm what you need to do and when, and put a plan in place so you are fully covered.