Making Tax Digital (MTD): A Guide For UK Sole Traders, Self-Employed & Landlords

1. What is Making Tax Digital ('MTD')

MTD is HMRC's programme to move tax reporting and record-keeping into the digital age. It already applies to VAT-registered businesses and is being rolled out (in phases) for those reporting Income Tax, specifically from self-employment and property. It requires certain individuals who meet the requirements of qualifying income to use MTD software to create and store digital records of their self-employment and property income and expenses. A quarterly update of these records must then be submitted to HMRC.

The aim is to achieve simpler, more accurate in-year reporting and thus minimise errors and penalties for taxpayers. However, it also means new software and new routines for many.

2. Who will be affected

MTD for Income Tax is being introduced in stages from 6 April 2026. The date at which an individual must join the scheme is dependent on their total annual income earned from self-employment and property throughout the proceeding tax year and will be assessed based on the Self Assessments submitted by 31 January. The thresholds and key dates are listed below:

Starting 6 April 2026 (for annual income £50k+): This applies to income earned during the 2024/25 Tax Year.
Starting 6 April 2027 (for annual income £30k+): This applies to income earned during the 2025/26 Tax Year.
Starting 6 April 2028 (for annual income £20k+): This applies to income earned during the 2026/27 Tax Year.

Example: an individual who earned £40,000 from self-employment and £25,000 from property income in the 24/25 tax year will submit their annual income in their online self-assessment tax return by 31 January 2026. The total £65,000 of income from self-employment and property income will be used by HMRC to determine whether the threshold of £50,000 for 6 April 2026 has been met. In this case, as the income is above the threshold the individual will be required to apply MTD from 6 April 2026.

HMRC will write to affected taxpayers letting them know when they must start applying MTD and how to sign up. If you're a new business, or first exceed a threshold, you'll be told when you become in-scope.

3. Exemptions

There are exemptions for people who genuinely can't use digital services. For example, due to age, disability, health, or religious reasons, and temporary deferrals are possible in limited circumstances. Exemptions include:

If due to your age, a health condition or disability, location, or religious beliefs, you are unable to use a computer, smart phone, or tablet to maintain digital records; and
If your qualifying income is below £20,000.

You are automatically exempt if any of the following apply:

You are completing a tax return as a trustee of a charity or non-registered pension scheme;
You do not have a national insurance number;
You are completing a tax return as a personal representative of someone who has died;
You are a Llyod's member in relation to your underwriting business; or
You are a non-resident company.

As it stands, HMRC has confirmed it does not intend to mandate MTD for Corporation Tax, (meaning no mandatory digital quarterly reporting for limited companies is planned for now).

4. What MTD requires you to do

If you are in-scope for MTD, you or an agent acting on your behalf, will be required to:

Keep digital records
Ensure digital records are kept using software (not just paper or ad-hoc spreadsheets). The records must hold the income and expense transactions as specified by HMRC.
Use compatible software
This can be a cloud accounting package, specialist MTD software, or software that connects via APIs to HMRC. Many packages already advertise MTD compatibility.
Send quarterly updates digitally
For Income Tax you'll send a short quarterly update (summary of income and expenses) and then an end-of-year final declaration (instead of, and eventually replacing, the old single annual Self-Assessment form for the in-scope parts).
Maintain digital links
If you use multiple pieces of software (e.g. a sales system and a bookkeeping spreadsheet) those systems must be digitally linked, or you must use bridging software to transfer data. You cannot use manual cut-and-paste, or any other manual upload of data as this breaks the "digital links" requirement.

5. Deadlines and frequencies: what to expect

Quarterly updates: you'll report sums each quarter; HMRC gives you up to one month after the end of the quarter to file the update (so generally a month after the period end). After the tax year you will still make a final declaration and complete any balancing payment by the usual payment dates.

Annual finalisation: an end-of-year declaration (and the familiar January deadline for tax payment/return balances) still applies. The reporting model changes the rhythm but not the overall tax due dates in most cases.

6. Practical tips for small businesses, start-ups and individuals

Check if you're in scope now: HMRC will use recent Self-Assessment returns to identify those who must join. If you're nearing the thresholds, plan now. (You can also sign up early to test.)
Pick software early: choose a recognised MTD-compatible package (many cloud bookkeeping packages and apps support MTD). If you already use a cloud accounting system you may already be ready. Check the vendor's MTD guidance.
If you like spreadsheets: you can still use spreadsheets, but you'll need bridging software or a tool that creates a digital link to HMRC. Manual copy/paste will not meet the digital links rules.
Keep tidy, simple records: digital record keeping makes quarterly reporting easier. We recommend setting up a bookkeeping habit (weekly or monthly) rather than leaving everything to year-end. This reduces errors and stress.
Watch penalty rules: the MTD regime has a different penalty framework, and the Government has signalled tougher penalties for late or missing payments in the MTD programme, so timely reporting, and payment, matters.
Plan cashflow for payments: quarterly reporting may make you more aware of in-year tax liabilities. We recommend you use the quarterly view to forecast and set aside money for tax bills.

7. How Halliday Styan can help

We're ready to make this transition painless. At Halliday Styan we can support you with this change by:

reviewing whether your business or personal tax position is in scope and when you'll be asked to join;
recommending or setting up MTD-compatible software (or bridging tools if you use spreadsheets);
setting up digital record-keeping workflows (so quarterly updates become a quick check rather than a chore);
managing the link to HMRC and submitting updates on your behalf in line with deadlines; and
performing a quick readiness review: charting your current record-keeping, highlight gaps, and give a simple step-by-step plan.

We are currently offering individuals a free readiness health-check of your bookkeeping and software, after which you will be provided with an action list of what you need to do to prepare for MTD.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.