| Date | Who is affected | Status |
|---|---|---|
| April 2019 | MTD for VAT: businesses above £85,000 threshold | Live |
| April 2022 | MTD for VAT: all VAT-registered businesses | Live |
| April 2026 | MTD for Income Tax: self-employed and landlords with income above £50,000 | Coming |
| April 2027 | MTD for Income Tax: income above £30,000 | Coming |
| April 2028 | MTD for Income Tax: income above £20,000 (proposed) | Proposed |
Under MTD for ITSA, you must use HMRC-compatible software to:
- Keep digital records of business income and expenses
- Submit quarterly updates to HMRC (four times a year)
- Submit a final declaration at the end of the tax year (replacing the Self Assessment return)
Compatible software includes FreeAgent, QuickBooks, Xero, Sage, and others. HMRC maintains a full list of approved software on their website.
Frequently asked questions
Making Tax Digital (MTD) is HMRC's programme to require businesses and individuals to keep digital records and submit tax information using compatible software. MTD for VAT has been mandatory since April 2022 for all VAT-registered businesses. MTD for Income Tax Self Assessment (ITSA) will apply to sole traders and landlords from April 2026.
If your business is VAT-registered, you are already subject to MTD for VAT regardless of your turnover. You must keep digital VAT records and submit returns using MTD-compatible software. You cannot use HMRC's online portal to file VAT returns manually. Non-compliance can result in penalties under the new points-based penalty regime.
MTD for Income Tax Self Assessment applies from April 2026 for self-employed people and landlords with qualifying income over £50,000, and from April 2027 for those with income over £30,000. You will need to submit quarterly updates to HMRC through compatible software, plus a final declaration at the year end. The annual self assessment tax return will eventually be replaced.
You must use HMRC-recognised MTD-compatible software to keep records and submit returns. Popular options include QuickBooks, Xero, Sage, FreeAgent, and KashFlow. Some bridging software can connect spreadsheets to HMRC's systems, which is acceptable for MTD for VAT. HMRC maintains a current list of approved software on its website.
HMRC uses a points-based penalty system for MTD. You receive a penalty point for each missed submission. Once you reach a threshold (4 points for quarterly filers), a £200 penalty is charged and a further £200 for each subsequent missed submission. Points expire after 24 months of full compliance. Separate penalties apply for late payment.