If you’ve been hearing whispers, rumours, or outright horror stories about Making Tax Digital (MTD) for Income Tax and wondering what it actually means for you, you’re in good company.
From April 2026, many UK sole traders and landlords need to keep digital records and send quarterly updates to HMRC in addition to their final declaration (the Self Assessment Tax Return). Sounds scary? Don’t worry, we’ve got your back.
Here’s a practical, step-by-step guide to help you get ready for MTD and maybe even make sense of your numbers while you’re at it.
Step 1: Check if MTD applies to you
HMRC should have sent you a “friendly” letter if you’re in the MTD club. If not, let’s cut through the bureaucracy.
MTD for Income Tax applies to individuals, not limited companies.
You’ll need to follow MTD rules if you have:
- Self-employed income
- Property (rental) income
And before you start celebrating, this is total income, not profit. So even if your business made a trading loss, if your turnover was more than £50k, you will still have to submit quarterly returns.
MTD thresholds and start dates
- £50,000+ income (2024–2025 tax year) → starts April 2026
- £30,000+ income (2025–2026 tax year) → starts April 2027
- £20,000+ income (2026–2027 tax year) → coming soon to a tax return near you
And I’m sorry to say, but even if your income has since dropped below the £50k threshold, you’ll still have to submit quarterly returns. Even if you’ve completely stopped one source of income. Let’s say you’ve sold your rental property but keep trading as a sole trader with less than £50k income per year, you’ll still have to submit quarterly returns.
If you have completely stopped all sources of self-employed and property income, make sure to contact HMRC now to be removed from Making Tax Digital. Phoning them is probably the quickest way to get this sorted, even though their hold music can drive anyone insane.
Step 2: Sign up now
If your income was £50,000+ in 2024–2025, now is the time to sign up, before the panic sets in for your first submission, which is due by 7 August 2026.
Sign up here:
👉 Gov.uk: Sign up for Making Tax Digital
What you’ll need:
- Government Gateway login (the one you set up when you first registered for Self Assessment and hope you didn’t forget)
- Your National Insurance number
- Business start date (or property income start date)
- Accounting period (1 April or 6 April—if you don’t know, check your last Self Assessment)
- Business name and address
- Nature of your business (the thing you’re actually good at, not tax)
Multiple income sources? You’ll need to sign up each one. Because why make things simple, right?
Step 3: Choose your MTD-compatible software
Under MTD, you need software to submit quarterly updates.
Your options:
Accounting software
- Lets you record income and expenses and submit your quarterly updates at the “click of a button”
- Gives you real-time insights
- Great if you want to understand how your business stands financially
- Offers other cool features such as connecting your bank account (so you don’t miss out on claiming expenses), sending invoices and reminders, and reducing manual data entry. It’s a great time saver, but you need to know what you’re doing.
Bridging software
- Lets you keep using spreadsheets (phew!)
- You upload your spreadsheet, and the software submits your numbers to HMRC
Tip: If in doubt, start simple with bridging software, then learn the basics of Bookkeeping and using accounting software.
👉 Here is a HMRC-approved software list
Step 4: Keep your Bookkeeping up to date
Yes, quarterly updates are a thing now. No, they don’t have to be perfect. Your quarterly updates are mainly about day-to-day business costs. Missed something? You can include it in another quarter. Adjustments like mileage and work-from-home allowances can be added at the end of the year in your final declaration.
How Making Tax Digital helps you (not just HMRC):
- Better visibility of your finances (you might even start to like numbers… maybe)
- Less stress when the tax year ends
- Possibly save money because you’re more likely to claim all your expenses (goodbye forgotten coffee receipts!)
Step 5: Know the quarterly deadlines
Mark these in your calendar or tattoo them on your hand (Disclaimer: this is a joke; we can’t be held responsible if you actually do get that tattoo).
- April–June → submit by 7 August
- July–September → submit by 7 November
- October–December → submit by 7 February
- January–March → submit by 7 May
But don’t worry, HMRC has promised a “soft landing,” meaning they won’t charge penalties for late submissions in the first tax year. Please don’t take this as a reason to ignore deadlines! It just means you have a little grace period to get used to the system.
Common questions
Will I pay tax quarterly?
Nope, not yet. But I wouldn’t put it past HMRC. And honestly, it might even help you avoid a year-end panic when a large tax payment is due.
Does MTD apply to Limited Companies and Partnerships?
No, lucky them! But avoid rushing into setting up a Limited Company just to dodge MTD. HMRC might not be amused, and dividend tax rate rises might mean that being a Limited Company might not save you cash. Speak to an accountant or tax advisor, as your best option depends on your circumstances.
Why does HMRC focus on small businesses rather than the big offenders?
The large offenders might be the naughtiest, but most of the “tax gap” comes from small businesses not keeping accurate records (knowingly or unknowingly). HMRC’s own words:
“The tax gap from small businesses is the largest component of the tax gap by customer group at a 60% share in 2023–2024; the tax gap from wealthy individuals makes up the lowest proportion at 5%.” Source
Final practical tips
- Open a separate business bank account (you’ll thank us later)
- Don’t leave Bookkeeping until the last minute. Hard choices now, easier life later
- You can do this yourself… but support is available if you want confidence (and sanity)
How we can help with Making Tax Digital
Thinking “I should probably do this, but where do I even start?” You’re not alone. Here’s how we can help:
Learn to do your own Bookkeeping (to get the basics right)
- Essential Bookkeeping Course (£49)
- A simple, jargon-free way to understand what you’re doing and why
👉 Bookkeeping course
Get support as you go
- The Bookkeeping Hangout: a space for questions, learning, and accountability
👉 The Bookkeeping Hangout
Get it set up properly
- Software setup support
- Quarterly reviews
👉 DIY Services
Or hand it over completely
- Done-for-you Bookkeeping & MTD submissions
👉 Managed Bookkeeping Packages
About Momentum360
Momentum360 is a down-to-earth team of Bookkeepers helping UK small business owners stay compliant without losing their minds or blowing their budget.
We turn numbers into something that actually makes sense, give practical guidance, and help you move forward with confidence.
No judgement. No jargon. Just clear, practical support to help your business stay compliant and grow.
We’d love to hear from you if you’re new to MTD or need any kind of support.
Phone: 01442 780 907
Mobile: 07305 138191
Email: enquiries@momentum360.co.uk
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