Making Tax Digital (MTD) is a UK government initiative requiring self-employed individuals and landlords to maintain digital records and submit quarterly updates to HMRC using compatible software. MTD becomes mandatory on 6 April 2026 for those with gross income over £50,000.
This guide covers who MTD affects, the key deadlines, software requirements, and how to prepare before the April 2026 deadline.
Who Must Comply with MTD
MTD for Income Tax Self Assessment (MTD ITSA) applies to:
- Self-employed sole traders with gross income over the threshold
- Landlords with gross property income over the threshold
- Partners in partnerships (from April 2025 for general partnerships)
Your gross income determines when you must comply—not your profit.
MTD Income Thresholds
| Compliance Date | Income Threshold | Estimated Taxpayers Affected | |-----------------|------------------|------------------------------| | 6 April 2026 | Over £50,000 | 780,000 | | 6 April 2027 | Over £30,000 | 970,000 | | TBC | Over £20,000 | To be announced |
According to HMRC guidance, these thresholds apply to gross income from self-employment and/or property combined.
What MTD Requires
Under MTD, you must:
- Maintain digital records using HMRC-recognised software
- Submit quarterly updates summarising income and expenses
- File a final declaration confirming your annual figures
- Keep records for 6 years as required by HMRC
Digital Record-Keeping Requirements
Your MTD software must digitally store:
- All business income received
- All allowable business expenses
- The date, amount, and category of each transaction
Paper records and spreadsheets alone will not meet MTD requirements. You need software that connects to HMRC's MTD API.
MTD Quarterly Update Deadlines
Each tax year, you submit four quarterly updates plus a final declaration:
| Quarter | Period Covered | Submission Deadline | |---------|---------------|---------------------| | Q1 | 6 April – 5 July | 7 August | | Q2 | 6 July – 5 October | 7 November | | Q3 | 6 October – 5 January | 7 February | | Q4 | 6 January – 5 April | 7 May | | Final Declaration | Full tax year | 31 January |
For the 2026/27 tax year (the first MTD year for those over £50,000), your first quarterly update is due 7 August 2026.
MTD Software Requirements
HMRC requires software that can:
- Store digital records of income and expenses
- Calculate tax liability
- Submit quarterly updates via the MTD API
- File the end-of-period statement and final declaration
HMRC-Recognised Software
HMRC maintains an official list of recognised MTD software on GOV.UK.
TaxFolio is HMRC-recognised software that handles MTD compliance for self-employed individuals and landlords. Key features include:
- Open Banking connections to UK banks via TrueLayer (FCA-authorised)
- AI-powered transaction categorisation for expenses
- Automatic quarterly reminders before each deadline
- One-click HMRC submission via the MTD API
- SA103 and SA105 support for self-employment and property income
Can I Use Spreadsheets?
Spreadsheets alone do not meet MTD requirements. However, you can use spreadsheets with "bridging software" that submits your data to HMRC in the correct format. This adds complexity—most users find full MTD software simpler.
MTD Penalties
HMRC operates a points-based penalty system for late submissions:
Late Submission Penalties
| Points Accumulated | Consequence | |-------------------|-------------| | 1 point | Warning (no fine) | | 2 points | Warning (no fine) | | 3 points | Warning (no fine) | | 4 points | £200 penalty | | 5+ points | £200 per additional late submission |
Points expire after 24 months of on-time submissions.
Late Payment Penalties
Separate from submission penalties:
- 15 days late: First penalty charge begins accruing
- 30 days late: Additional charge
- Interest: Accrues from the payment due date
How to Prepare for MTD
Step 1: Determine Your Compliance Date
Calculate your gross income from self-employment and property:
- Over £50,000: You must comply from 6 April 2026
- £30,000–£50,000: You must comply from 6 April 2027
- Under £30,000: Not yet required (threshold TBC)
Step 2: Choose MTD Software
Select HMRC-recognised software before your compliance date. Consider:
- Does it connect to your bank?
- Does it handle your income types (self-employment, property, or both)?
- What is the annual cost?
- Is there a free trial?
Compare MTD software options in our detailed guide.
Step 3: Connect Your Bank Accounts
Link your business bank accounts to your MTD software. This automates transaction imports and reduces manual data entry.
TaxFolio connects to all major UK banks via Open Banking (TrueLayer), providing read-only access to transactions.
Step 4: Categorise Historical Transactions
Before your first quarterly update, categorise past transactions to establish accurate records. AI categorisation in TaxFolio automates most of this work.
Step 5: Submit a Practice Quarter
Run through the quarterly update process before it counts. This identifies any gaps in your record-keeping.
MTD for Different Income Types
MTD for Self-Employed (SA103)
Self-employed sole traders report business income and expenses. Your MTD software must track:
- All business income
- Allowable business expenses by category
- Capital allowances on equipment
Learn more in our Sole Trader Tax Guide.
MTD for Landlords (SA105)
Landlords with property income report rental income and property expenses. Your MTD software must track:
- Rental income from each property
- Allowable property expenses
- Mortgage interest (for tax credit calculation)
Learn more in our Landlord Tax Guide.
Multiple Income Sources
If you have both self-employment and property income, your gross income from both sources combined determines your threshold. You submit updates covering all income types.
TaxFolio handles both SA103 (self-employment) and SA105 (property) in a single account.
MTD vs Traditional Self Assessment
| Aspect | Traditional Self Assessment | Making Tax Digital | |--------|----------------------------|-------------------| | Record-keeping | Paper or digital | Digital only | | Submissions | Once per year | Quarterly + final | | Deadline | 31 January | Quarterly + 31 January | | Software | Optional | Required | | Real-time tax view | No | Yes |
MTD provides more frequent visibility into your tax position, reducing January surprises.
Exemptions from MTD
Some taxpayers are exempt from MTD:
- Those with gross income below the threshold
- Individuals who are digitally excluded (cannot use computers)
- Those with religious objections to digital technology
If you believe you qualify for an exemption, contact HMRC.
Key Dates: MTD Timeline
| Date | Event | |------|-------| | Now | Choose MTD software and begin preparation | | 6 April 2026 | MTD mandatory for income over £50,000 | | 7 August 2026 | First Q1 submission deadline (2026/27) | | 6 April 2027 | MTD mandatory for income over £30,000 | | 31 January 2028 | First MTD final declaration deadline |
Get MTD-Ready with TaxFolio
TaxFolio is HMRC-recognised software built specifically for Making Tax Digital. Connect your bank, let AI categorise your transactions, and submit quarterly updates to HMRC in minutes.
- 15-minute setup with Open Banking
- AI categorisation sorts expenses automatically
- Quarterly reminders ensure you never miss a deadline
- Direct HMRC submission via the MTD API
- From £69.99/year with no monthly fees
Start your free 30-day trial and be ready for MTD before the April 2026 deadline.