Making Tax Digital explained in plain English

Making Tax Digital, usually shortened to MTD, is HMRC’s programme for keeping tax records digitally and sending information to HMRC through software. MTD for Income Tax is the part that affects sole traders and landlords.

If it applies to you, you keep your business income and expenses in software or a linked spreadsheet. Four times a year, the software adds up your records and sends a summary for each business to HMRC. After the tax year ends, you finish the year in the same software and submit your tax return.

That is the whole change. You still pay tax on the same dates, and a quarterly update is not a tax return or a bill.

HMRC describes MTD for Income Tax as a new way for sole traders and landlords to do Self Assessment. In its guidance, HMRC says keeping digital records in software lets you see your up-to-date cash flow and helps you spot mistakes early.

HMRC also says that when you send quarterly updates, you can see your predicted tax bill. It says this can help you make more informed decisions for your business and get your tax right.

In practice, you no longer find out your tax position only once a year. You can see an estimate after each update, though it stays an estimate until your tax return is done.

MTD for Income Tax is being brought in over three years, based on your qualifying income. That is your self-employment and property income added together, before expenses. HMRC tests it on a tax return for an earlier year.

If your qualifying income is £20,000 or less, you are automatically exempt. Some other people are exempt too, and some can apply, for example if their age, health or disability stops them using a computer, tablet or smartphone.

Self-employment turnover and rent count, before any expenses. If you live in the UK, foreign property income counts too. For a jointly owned property, only your share counts.

Wages from a job, dividends, the State Pension, private pensions and your share of partnership profit do not count. Someone with a £60,000 salary and £12,000 of rent has qualifying income of £12,000, which is under every threshold.

Under the old Self Assessment year, many people kept records however they liked and sent everything to HMRC in one go by 31 January. Under MTD, the records are digital and HMRC hears from you during the year as well.

Some things stay the same. MTD uses the same categories of income and expenses as Self Assessment, and you pay on the same dates.

Each quarterly update covers the tax year so far, from 6 April (or 1 April if you chose calendar update periods) to the end of the period. These are HMRC’s standard deadlines. Your own deadlines come from HMRC and show in your software and your HMRC online account.

If you started in April 2026, your first MTD year runs to 5 April 2027. HMRC lists your fourth update as due by 7 May 2027 and your first MTD tax return as due by 31 January 2028.

A fictional landlord lets three flats for £60,000 a year in total, with £15,000 of costs. Before MTD, they kept a notebook and sent one tax return in January. Their qualifying income is more than £50,000, so they started MTD on 6 April 2026.

Now they keep the same income and costs in a spreadsheet, upload the year-to-date totals four times a year and submit their tax return through the same software. MTD does not change their profit or the dates they pay.

A few common assumptions make MTD sound harder than it is.

If you are unsure about any of these, the GOV.UK pages listed in the sources below explain each rule in full.

• A quarterly update is a summary, not a tax return
• You do not make tax adjustments before each update
• Quarterly updates do not create new tax payment dates
• You still submit a tax return after the tax year
• You can keep a spreadsheet, with bridging software
• You can still use an accountant or agent
• HMRC does not receive your receipts

MTD has its own vocabulary. These are the terms you will meet most often on GOV.UK and in software.

You may also see SA103 and SA105, the self-employment and UK property pages of the Self Assessment return. MTD uses the same income and expense categories.

People new to MTD tend to make the same few mistakes. Most come from hearing a rule second-hand.

Checking the rule on GOV.UK, or in a guide that cites it, avoids all of them.

• Assuming MTD means paying tax four times a year
• Checking the threshold on profit instead of income before expenses
• Counting wages or dividends towards qualifying income
• Waiting for HMRC to write before checking
• Thinking you must give up your spreadsheet
• Leaving records until the week of the deadline

SimpleTaxFlow is MTD for Income Tax software for sole traders and landlords, listed in HMRC’s software finder. You can keep your spreadsheet and upload your totals, or record income and expenses in Bookkeeping, where bookkeeping is free.

You check the figures before each quarterly update, see HMRC’s calculation afterwards and submit your tax return at year end.

You do not need to change everything in one day. Start with these.

If HMRC has already signed you up, sign in to HMRC online services and check the income sources it holds for you first.

1. 1Check whether and when you must join, using your qualifying income and HMRC’s guidance
2. 2Choose software that covers your income sources and the way you like to work
3. 3Keep digital records from the start of the tax year, before your first deadline

Tax rules can change and your circumstances matter. Use HMRC’s current guidance to confirm what applies to you.