Making Tax Digital 2026: MTD for Income Tax, VAT, Software & Deadlines
Quick answer
Making Tax Digital, usually called MTD, is HMRC’s system for moving tax records and tax submissions into compatible digital software.
MTD already applies to VAT-registered businesses, which must keep digital VAT records and file VAT returns using compatible software.
MTD for Income Tax is being introduced in phases for self-employed individuals and landlords.
Current HMRC guidance says:
Start date
6 April 2026
Sole traders and landlords with qualifying income over £50,000 based on their 2024/25 tax return
6 April 2027
Sole traders and landlords with qualifying income over £30,000 based on their 2025/26 tax return
MTD means affected taxpayers will need to keep digital records, use compatible software and submit updates to HMRC during the year.
MTD can affect:
sole traders
landlords
VAT-registered businesses
self-employed workers
small business owners
accountants and bookkeepers
businesses using spreadsheets
businesses changing accounting software
businesses that need payroll and accounting support
Popular MTD-compatible software options include Xero, QuickBooks, Sage, FreeAgent, IRIS and HMRC-recognised bridging software.
If you are unsure whether your current bookkeeping, payroll or accounting setup is ready, compare software and support providers before the deadline.
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Need help getting ready for Making Tax Digital? This quote service is best for UK businesses, sole traders and landlords that want to compare support for:
MTD-compatible accounting software
VAT record-keeping software
MTD for Income Tax software
bookkeeping support
payroll and accounting software
digital record-keeping
accountant-led MTD support
VAT return software
bridging software
small business tax software
software migration
payroll, payslips and HMRC submissions
It is not the best fit if you only need:
personal tax advice with no business activity
free HMRC guidance only
a one-off tax calculation
legal tax avoidance advice
non-UK tax software
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Contents
What is Making Tax Digital (MTD)?
Making Tax Digital Timeline
What is VAT?
Benefits of Making Tax Digital
MTD Requirements
How do we work?
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Authored by: Ally Cox (Business Technology & B2B Services Specialist 10+ Years’ Experience)
Reviewed by: James Ward (Telecoms Specialist, 12+ Years Experience)
Last Updated: August 2026
Key Takeaways
Making Tax Digital is HMRC’s programme for digital tax records and digital submissions.
MTD already applies to VAT-registered businesses.
VAT-registered businesses must keep digital VAT records and file VAT returns using compatible software.
MTD for Income Tax starts from 6 April 2026 for sole traders and landlords with qualifying income over £50,000.
MTD for Income Tax starts from 6 April 2027 for sole traders and landlords with qualifying income over £30,000.
The old £10,000 threshold and 2024 start date should no longer be used for current guidance.
MTD-compatible software can include accounting software, bookkeeping software or bridging software.
Spreadsheets may still be used in some cases, but digital links and compatible submission software are important.
Affected taxpayers should review their software, bookkeeping process and accountant support before the deadline.
Businesses reviewing MTD may also want to compare payroll, accounting and bookkeeping support together.
Compare MTD-compatible software and business support before switching.
What is Making Tax Digital (MTD)? Making Tax Digital is an HMRC programme designed to reduce errors and modernise tax administration by requiring digital records and software-based submissions.
Instead of relying only on paper records, manual forms or disconnected spreadsheets, affected businesses and individuals use compatible software to keep records and send required information to HMRC.
MTD currently covers VAT and is being extended to Income Tax for eligible sole traders and landlords.
In practice, MTD can mean:
keeping digital records
using compatible accounting software
using bridging software where appropriate
submitting VAT returns digitally
submitting Income Tax updates digitally
keeping bookkeeping records up to date
sharing digital records with an accountant
improving links between bookkeeping, payroll and tax records
MTD does not mean every business needs the most expensive software and having the right setup depends on tax type, income level, VAT status, bookkeeping complexity and whether you already use an accountant.
Making Tax Digital Timeline
Date
MTD phase
What it means
April 2019
MTD for VAT began for many VAT-registered businesses
VAT-registered businesses above the VAT threshold started using MTD-compatible software
April 2022
MTD for VAT expanded
MTD for VAT applied to all VAT-registered businesses
6 April 2026
MTD for Income Tax phase 1
Applies to sole traders and landlords with qualifying income over £50,000
6 April 2027
MTD for Income Tax phase 2
Applies to sole traders and landlords with qualifying income over £30,000
Future
Wider Income Tax rollout
Further phases may apply depending on HMRC rules
Future
Corporation Tax
MTD for Corporation Tax has not yet been fully rolled out
MTD for VAT MTD for VAT applies to VAT-registered businesses.
Under MTD for VAT, businesses must keep digital VAT records and submit VAT returns using compatible software.
This can include:
accounting software
bookkeeping software
VAT return software
bridging software
spreadsheet plus compatible digital links
accountant or bookkeeper-supported submissions
Who needs MTD for VAT?
All VAT-registered businesses should now be using MTD for VAT, unless an exemption applies.
What records are needed?
VAT-registered businesses usually need to keep digital records of information used to complete VAT returns, including business details, supplies made, supplies received and VAT account information.
What should businesses check?
Before choosing MTD software, check whether it supports:
VAT return submission
digital record-keeping
bank feeds
invoicing
expenses
VAT schemes
digital links
accountant access
payroll add-ons if needed
reporting
support
MTD for Income Tax
MTD for Income Tax affects some sole traders and landlords.
HMRC’s current timetable is:
Start date
Who must use MTD for Income Tax?
6 April 2026
Sole traders and landlords with qualifying income over £50,000
6 April 2027
Sole traders and landlords with qualifying income over £30,000
Qualifying income generally relates to gross income from self-employment and property, not profit after expenses.
What will affected taxpayers need to do?
Affected sole traders and landlords will need to:
keep digital records
use compatible software
submit updates to HMRC during the year
make a final declaration
keep records up to date
review software or accountant support before the deadline
Who should prepare now?
You should review MTD for Income Tax if you are:
self-employed
a sole trader
a landlord
both self-employed and a landlord
using spreadsheets
using paper records
using non-compatible bookkeeping software
close to the income threshold
relying on an accountant for Self Assessment
Benefits of Making Tax Digital
Digital records will reduce the risk of errors associated with manual data entry. Digital tax records will save you time in the long run. MTD will improve transparency and makes it easier to track financial performance and compliance. MTD software can easily integrate with existing accounting systems, making it easier to comply with tax regulations.
Who needs Making Tax Digital software? You could need MTD-compatible software if you are:
Situation
VAT-registered business
Sole trader over the Income Tax threshold
MTD for Income Tax software
Landlord over the Income Tax threshold
MTD for Income Tax software
Sole trader and landlord combined over the threshold
MTD for Income Tax software
Business using spreadsheets for VAT
Bridging software or accounting software
Business using paper records
Digital record-keeping software
Business with accountant-led bookkeeping
Check your accountant’s MTD software
Business with payroll and bookkeeping needs
Accounting plus payroll software may help
Limited company
MTD for VAT may apply if VAT-registered
MTD Requirements
Group
VAT-registered businesses
Keep digital VAT records and file VAT returns using MTD-compatible software
Sole traders over £50,000 qualifying income
Use MTD for Income Tax from 6 April 2026
Landlords over £50,000 qualifying income
Use MTD for Income Tax from 6 April 2026
Sole traders over £30,000 qualifying income
Use MTD for Income Tax from 6 April 2027
Landlords over £30,000 qualifying income
Use MTD for Income Tax from 6 April 2027
Limited companies
MTD for VAT applies if VAT-registered; Corporation Tax rollout is not fully live
Partnerships
Check current HMRC rules before relying on older rollout dates
MTD-Compatible Software MTD-compatible software is software that can keep digital records and send required information to HMRC and common options include:
Xero
QuickBooks
Sage
FreeAgent
IRIS
TaxCalc
Capium
KashFlow
Clear Books
bridging software for spreadsheets
accountant-supported software
What should MTD software include?
Before choosing software, check whether it supports:
MTD for VAT
MTD for Income Tax
digital record-keeping
VAT return submission
quarterly updates
final declaration support
bank feeds
invoicing
expenses
property income
self-employment income
accountant access
payroll integration
reporting
data export
support
Not every MTD-compatible tool is right for every user. A landlord, sole trader, VAT-registered company and accountant may all need different software.
Digital Record-Keeping MTD requires affected businesses and individuals to keep records digitally.
Depending on your situation, digital records may include:
sales invoices
purchase invoices
expenses
VAT records
income from self-employment
property income
bank transactions
mileage
receipts
adjustments
accounting periods
VAT scheme records
tax category information
Digital record-keeping does not always mean using a large accounting system. Some businesses may use simpler software or bridging tools, but the setup must meet HMRC requirements.
Quarterly Updates & End of Period Statement (EOPS) MTD for Income Tax changes the rhythm of reporting.
Affected taxpayers will generally need to keep digital records and send updates to HMRC during the year.
This may include:
quarterly updates
year-end adjustments
final declaration
digital record-keeping
software-based submissions
The aim is to keep tax information more current rather than relying only on one annual Self Assessment submission.
Older references to End of Period Statements should be checked carefully, because HMRC terminology and process guidance has changed over time.
At the end of the tax year, businesses must submit an End of Period Statement (EOPS ) to confirm that the quarterly updates are accurate, and then a final declaration will also be required to calculate the final tax liability.
What should you compare before choosing MTD software? Before choosing MTD software, compare:
MTD for VAT support
MTD for Income Tax support
sole trader features
landlord/property income features
VAT scheme support
bank feeds
invoicing
expenses
receipt capture
spreadsheet bridging
accountant access
payroll integration
mobile app
multi-business support
data export
setup support
monthly cost
support level
contract length
cancellation terms
If you already use accounting software, ask whether your current plan supports the MTD requirement you need.
FAQs – Making Tax Digital (MTD) UK What is Making Tax Digital?
Making Tax Digital is HMRC’s programme for digital tax records and software-based tax submissions. It currently applies to VAT and is being extended to Income Tax for eligible sole traders and landlords.
Who needs Making Tax Digital for VAT?
All VAT-registered businesses should now be signed up for Making Tax Digital for VAT and use compatible software to keep VAT records and file VAT returns, unless an exemption applies.
When does MTD for Income Tax start?
MTD for Income Tax starts from 6 April 2026 for sole traders and landlords with qualifying income over £50,000. It starts from 6 April 2027 for those with qualifying income over £30,000.
Is the MTD Income Tax threshold £10,000?
No. Older guidance referred to a £10,000 threshold, but current HMRC guidance uses phased thresholds of over £50,000 from April 2026 and over £30,000 from April 2027.
Does MTD apply to landlords?
Yes, MTD for Income Tax can apply to landlords if their qualifying income is above the relevant threshold.
Does MTD apply to sole traders?
Yes, MTD for Income Tax can apply to sole traders if their qualifying income is above the relevant threshold.
Is the MTD threshold based on income or profit?
The threshold is based on qualifying income, not profit after expenses. This means gross self-employment and property income are important.
What software is compatible with Making Tax Digital?
MTD-compatible software can include accounting software, bookkeeping software, tax software or bridging software. Examples include Xero, QuickBooks, Sage, FreeAgent, IRIS and other HMRC-recognised software.
Can I use spreadsheets for MTD?
Some businesses may be able to use spreadsheets with bridging software and digital links, but the process must meet HMRC requirements.
What records do I need to keep digitally?
This depends on whether you are using MTD for VAT or Income Tax. Records may include sales, purchases, expenses, VAT records, self-employment income, property income and other tax information.
What happens if I do not comply with MTD?
HMRC may apply penalties or require corrections if a business does not meet the relevant digital record and submission requirements.
Do limited companies need Making Tax Digital?
Limited companies may need MTD for VAT if they are VAT-registered. MTD for Corporation Tax has not yet been fully rolled out.
Do partnerships need MTD?
Partnership rules have changed over time, so partnerships should check current HMRC guidance or speak to an accountant before relying on older rollout dates.
Do I need an accountant for MTD?
You do not always need an accountant, but many businesses use one to choose software, keep records correctly and manage VAT or Income Tax submissions.
Should I change accounting software for MTD?
You may need to change software if your current system cannot keep digital records or submit the required information to HMRC.
Compare MTD software and business support Need help getting ready for Making Tax Digital?
Compare providers based on:
MTD for VAT
MTD for Income Tax
sole trader support
landlord support
accounting software
bookkeeping support
bridging software
VAT return submissions
bank feeds
invoicing
expenses
accountant access
payroll integration
payroll services
support level
setup and migration
total monthly cost
Compare MTD, accounting and payroll support quotes before choosing.
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Hi, I’m Ally Cox , a senior copywriter and blogger at CompareYourBusinessCosts.co.uk, the UK’s trusted platform for comparing business services.over a decade of experience in the B2B sector, I specialise in simplifying complex topics like leased lines, VoIP, business energy, HR and payroll solutions, accounting software, and EPOS systems .HR, copywriting, and business operations- from clocking-in systems to card machines and office technology .informed, confident decisions when choosing products and services that improve efficiency and save money.
