What is Making Tax Digital for Income Tax? A plain-English guide
Making Tax Digital for Income Tax is the biggest change to Self Assessment in a generation — but the idea underneath it is simpler than the acronyms suggest. Here is what it actually is, in plain English.
Making Tax Digital for Income Tax (often shortened to MTD for Income Tax or MTD ITSA) is HMRC's new way of doing Self Assessment for sole traders and landlords. Instead of one tax return once a year, you keep your records digitally and send HMRC a short update every three months, then finish the year with a final declaration. Same tax, same allowances, same dates for paying — a different, more frequent way of reporting.
The three things that change
- Digital records. You must keep your business income and expenses in software (or a spreadsheet linked to software), not on paper or in your head. Each transaction needs a date, an amount and a category.
- Quarterly updates. Four times a year you send HMRC a running total of your income and expenses. These are simple summaries — not four mini tax returns, and they never calculate your tax.
- A final declaration. After the tax year ends you confirm your figures, add anything else (like employment or savings income), claim your reliefs and allowances, and declare the year final. This replaces the old SA100 tax return.
A quarterly update is a cumulative summary of totals — not a tax calculation and not a payment. You are simply telling HMRC 'here is my income and expenses so far this year.' Nothing is finalised, and nothing is due to pay, until the final declaration.
What does not change
- The tax you pay and how it is worked out. MTD is about reporting, not a new tax.
- The UK tax year: still 6 April to 5 April.
- Your payment dates: the balancing payment and payments on account are still due 31 January and 31 July as normal.
- Your allowances and reliefs: the trading allowance, personal allowance, the property finance-cost restriction and the rest all still apply — you claim them at the final declaration.
Who has to do it, and when
You are brought into MTD for Income Tax based on your qualifying income — broadly, your gross income from self-employment and property added together, before you take off any expenses. HMRC checks that figure on your Self Assessment return and writes to confirm when you are in. The threshold steps down over three years:
| You must use MTD from | If qualifying income is over | Based on your return for |
|---|---|---|
| 6 April 2026 | £50,000 | 2024–25 |
| 6 April 2027 | £30,000 | 2025–26 |
| 6 April 2028 | £20,000 | 2026–27 |
The figure is gross, not profit: a business turning over £58,000 with £46,000 of costs still counts as £58,000 against the threshold. It is also your combined total — a sole trader who is also a landlord adds both gross incomes together. You can check the current rules on HMRC's page, Check if you're eligible for Making Tax Digital for Income Tax.
What counts as a 'digital record'
Less than you might fear. For every transaction you record three things: the amount, the date, and the category (what type of income or expense it is). HMRC's key simplifier is that MTD uses the same categories as Self Assessment — so if you already know roughly which box a cost belongs to, you already know your MTD category.
If your qualifying income is below the £90,000 VAT-registration threshold, you can keep it even simpler and report just total income and total expenses for each source (a 'three-line account'). Landlords are the one exception: you must always keep residential finance costs — such as mortgage interest — in their own category, because they are treated differently from ordinary expenses.
Yes. A spreadsheet can be your digital record, as long as it is digitally linked to MTD-compatible 'bridging' software that makes the actual submission to HMRC. What is no longer allowed is a paper cash book or a shoebox of receipts as your only record.
The rhythm of a year
Four quarterly updates (due 7 August, 7 November, 7 February and 7 May), then one final declaration by 31 January after the tax year ends. The updates are new; the payment dates are exactly as before. If you keep a small weekly habit of recording income and costs, the quarterly updates become a formality and the year-end is a review rather than a reconstruction.
Sources: HMRC guidance on gov.uk covering eligibility, qualifying income, digital records, quarterly updates, the final declaration and penalties. This is general information, not tax advice.
General information, not tax or financial advice. Always confirm your own position with HMRC or a qualified adviser. This article was last checked against published gov.uk guidance on 13 July 2026. Rules and figures can change — always confirm your own position with HMRC or a qualified adviser.