Making Tax Digital, overview

What MTD is

Making Tax Digital (MTD) is HMRC's programme to digitise UK tax administration. It has two pillars: digital records and digital submissions. Once you're in scope, you must keep records using compatible software and submit returns directly from that software.

MTD for VAT (live)

Since April 2022, all VAT-registered businesses — regardless of turnover — must follow MTD for VAT. That means digital records of every sale and purchase, and submitting VAT returns through MTD-compatible software.

MTD for Income Tax (April 2026 onwards)

MTD for Income Tax Self Assessment (MTD ITSA) phases in from April 2026:

• April 2026: sole traders and landlords with combined gross income above £50,000
• April 2027: threshold drops to £30,000
• April 2028: threshold drops to £20,000

If you're in scope, you'll send quarterly updates to HMRC summarising income and expenses, plus an end-of-period statement and a final declaration each year.

What "digital records" means

• Every transaction recorded individually in software
• Date, amount, and category for each line
• For VAT: the VAT amount and rate too
• No manually re-entering totals from a paper ledger

What is NOT acceptable

• Paper records alone
• Spreadsheets with manually-typed totals (no audit trail of individual transactions)
• Systems where you re-key data into a separate filing tool

Spreadsheets ARE allowed — but only if linked via "bridging software" that pulls the data through digitally without manual re-entry.

What to do now

• If you're VAT-registered: you should already be on MTD-compatible software
• If you're a landlord or sole trader: estimate your combined gross income to know which MTD ITSA threshold catches you and when
• Trial MTD-compatible software well before your start date — switching in a panic is messy