Making Tax Digital has been announced, delayed, re-announced and delayed again so many times that most business owners have stopped paying attention. Fair enough. But the first big phase of MTD for Income Tax went live in April 2026, so it has stopped being theoretical — and the thresholds drop twice more over the next two years.
Here is the whole thing without the acronym soup.
What MTD actually is
MTD is HMRC moving tax off paper and annual forms and onto software and regular updates. Instead of one big return at the end of the year, you keep digital records as you go and send HMRC a short update every quarter, then confirm everything once at year end.
That is genuinely all it is. The rules around it are fiddly; the concept is not.
Does it apply to you, and from when?
MTD for Income Tax applies to sole traders and landlords, and it is being phased in by income level:
- From April 2026 — qualifying income over £50,000. This phase is live now.
- From April 2027 — qualifying income over £30,000.
- From April 2028 — qualifying income over £20,000.
If you are VAT registered, you are already inside MTD for VAT and have been for a while. That is a separate regime with its own rules, and being in it does not automatically put you into MTD for Income Tax.
The trap almost everyone falls into
This catches people out constantly. If you turn over £60,000 and your profit after costs is £28,000, you are looking at the £60,000 figure. You were in scope from April 2026.
It also adds up across sources. Self-employment income and property income are combined when HMRC works out whether you cross a threshold. A modest freelance business plus one rental property can put you over the line when neither would on its own.
HMRC decides your start date by looking at the qualifying income on your most recent submitted return. So the return you filed in January 2026 — covering 2024/25 — is what determined whether April 2026 applied to you.
What actually changes day to day
Three things:
- Digital records. Income and expenses have to be recorded in compatible software. Paper ledgers and standalone spreadsheets no longer satisfy the rules on their own.
- Quarterly updates. Four short submissions a year of your income and expenses to date. These are running totals, not four mini tax returns — no calculations, no claims, no final figures.
- A final declaration. Once a year, after the quarters, you confirm the full picture including anything outside the business. This replaces the Self Assessment return you are used to and is still due by 31 January.
Worth stressing: the quarterly updates are not four tax bills. Your payment dates do not change. It is a reporting change, not a payment change.
Will this create more work?
Honestly — if your bookkeeping is currently a carrier bag of receipts reconciled every January, yes, the rhythm changes. You cannot leave it all to the end any more.
But that is mostly a redistribution of work you were already doing, spread across the year instead of compressed into one horrible fortnight. And most of it disappears into software. Bank feeds pull transactions in automatically. Receipt capture means photographing something once rather than filing it twice.
For clients whose books we already keep, MTD changed almost nothing. The records were digital and current, so the quarterly updates were something we do rather than something they notice.
What to do now
- Work out your qualifying income — gross turnover, all sources combined — and check it against the thresholds above.
- If you are near a threshold, assume you are in. It is easier to be ready early than to scramble.
- Get onto compatible software before your start date, not on it. Give yourself a quarter to get used to it.
- Connect your bank feeds and start capturing receipts digitally. This is the habit that makes everything else easy.
- If you are behind on your bookkeeping, deal with that first. MTD on top of messy records is genuinely painful.
The short version
MTD is a change of rhythm, not a change of tax. You will not pay more because of it, and you will not pay differently. You will report more often, in software, and the year end will be quieter as a result.
If you would rather not think about which phase applies to you or what a compatible digital link is, that is exactly the sort of thing we handle. Ask us and we will tell you your date.