Updated on 25 March 2025

Making tax digital for income tax

HMRC’s ‘Making Tax Digital’ programme is a key element of HMRC’s digital transformation plans. This flagship project, first announced in 2015, is being phased in over a number of years. Making Tax Digital (MTD) for VAT was the first element of the programme to be rolled out, beginning in April 2019. Making Tax Digital (MTD) for income tax is now due to be introduced in phases, beginning in April 2026.

On this page we explain below what MTD for income tax is, who it applies to and when it becomes compulsory to follow the rules. 

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Content on this page:

Scope

Making Tax Digital (MTD) for income tax will eventually affect self-employed individuals and individuals receiving property income with annual gross income of more than £20,000 from their self-employment and property letting. Those with annual gross income of £20,000 or less from these sources are not in scope of MTD. See the Gross income section below for more details on calculating this figure.

You can choose to follow the MTD rules voluntarily if you want to, even if you are not legally required to do so.

Partnerships

The government have confirmed that MTD will become mandatory for partnerships in due course, but it is not yet known when this will be.

Your start date

Making Tax Digital (MTD) was originally due to become mandatory from April 2024 however the timetable for compulsory compliance with the rules was revised in December 2022 and it is now as follows:

  • From 6 April 2026, for those with annual gross income of over £50,000 from self-employment and property letting
  • From 6 April 2027, for those with annual gross income of more than £30,000 and up to £50,000 from self-employment and property letting

The date for when those with annual gross income of more than £20,000 and up to £30,000 from self-employment and property letting have to comply with MTD has not yet been confirmed by the government but it is expected to be by July 2029 at the latest.

You can choose to follow the MTD rules voluntarily if you want to, even if you are not legally required to do so. 

HMRC will initially review all self assessment tax returns filed for the 2024/25 tax year to identify those who need to follow the MTD rules from April 2026. Therefore, assuming you file your 2024/25 tax return before the deadline of 31 January 2026, if it shows that you have gross income from self-employment and/or rental income of more than £50,000 you should receive a letter from HMRC in February 2026 to notify you that you need to comply with MTD from 6 April 2026.

You will be able to apply for exemption from MTD if you meet certain criteria. Our Exemption section below has more information on this.

  If you wait until you receive a letter from HMRC telling you that you are in scope of MTD from 6 April 2026 you will not have very long to get prepared. If you know that you will have to follow the MTD rules from April 2026, it might be a good idea not to delay getting ready for MTD for too long so you have enough time to be fully prepared. Our Getting prepared section below explains what you will need to do.

HMRC have created a tool to help people check when they will be required to follow the MTD rules, so follow the link below if you are not sure of your position:

Find out if and when you need to use Making Tax Digital for Income Tax - GOV.UK

If you start a new self-employment or start to receive rental income on or after 6 April 2025 you will be in scope of MTD once your annual gross income exceeds the relevant MTD threshold. You will be required to follow the MTD rules from 6 April AFTER the 31 January filing deadline for the self assessment tax return which shows the relevant gross income figure. Alternatively you will need to apply for exemption from MTD, see our Exemption section below.

Example- start date for new self-employment

Calvin started a new garden maintenance self-employment on 6 October 2025. His 2025/26 tax return showed a loss but his 2026/27 tax return showed the following details for his self-employment:

Gross income     £35,052

Expenses             £14,965

Net profit            £20,087

As his annual gross income is more than the MTD threshold of £30,000 (from April 2027) Calvin will need to follow the MTD rules from April 2028. (This is the April after the filing deadline of 31 January 2028 for his 2026/27 tax return.)

The digital requirements

Making Tax Digital (MTD) for income tax is a new system for recording and reporting income and expenses if you are self-employed and/or receive property income. When you come within scope of the MTD for income tax regime, you will be required to:

1. Keep digital records

This is a new legal requirement to maintain business records digitally which means that a digital record-keeping system will need to be used. You will either have to use specific accounting software packages, or apps, or maintain spreadsheets to record business transactions.

Many software companies are still developing products to meet the MTD requirements. Products currently on the market are listed on GOV.UK.

HMRC have confirmed they are not producing their own software or app to enable digital records to be maintained, so it will be necessary to choose or purchase a system you feel is suitable for your business and within your budget. 

HMRC have said that they expect some free products to be available from commercial software providers in due course. We discuss choosing software in our Software section below.

If you have more than one source of income for which you need to file quarterly updates, for example, two separate self-employments or a self-employment and a rental property, you will need to keep separate digital records for each source. This might mean that you have to pay for more than one software licence within your software product or you may even need two separate software products (for example, one which deals with a self-employment, and one which is specifically for landlords.)

If you are VAT registered and are already using software that meets the requirements of Making Tax Digital for VAT, you will need to consider how you will also meet the Making Tax Digital for income tax requirements. You could check with your current provider to see whether this will become MTD for income tax compliant in due course. If not, then you may need to look around for a different product which will cover both requirements so you don’t need to keep two sets of records on two different pieces of software

If you do not keep your records digitally now you need to decide how you are going to change to a digital system, and when you are going to do this, bearing in mind when you expect to be in scope of MTD. This could depend on several factors such as:

  • How experienced or confident are you when using IT/software?
  • Do you have access to the internet? If so, how reliable is your broadband service?
  • Do you have anyone to ask if you need any help? If so, are they already using a particular product in their own business that they can recommend to you?
  • What kind of budget do you have (if any)?
  • What hardware you are most comfortable using (e.g. laptop, tablet, phone etc)? Does it have the necessary system requirements to run the software?
  • Is there anywhere you can get some training? (YouTube videos, chat forums, local IT support groups, local charities, etc.)

Software

There is no record-keeping software available from HMRC, so it will be necessary to use a commercial system you feel is suitable for your business and within your budget. The cost of the software packages varies between suppliers. The government have pledged to ensure that some suppliers offer free products, but there are currently very few on the market. Free products may also be subject to specific limitations such as that the product may only be free for a limited time or may only be for the simplest version of a software developer’s product. Therefore, you must be careful when reviewing potential software products to try to ensure you get the most suitable product for your circumstances.

There are lots of different products on the market so it might be difficult to choose one that you think will work for you, both now and in the future. Some things to consider when choosing a product might be:

  • Are you clear about the costs/charges associated with the product, if any?
  • Does the product offer customer support if you have a problem/get stuck? If so, how is this delivered – e.g. by email, webchat, phone? Are there any additional charges if you need support?
  • Can you transfer all your data from the product to a new product easily if you decide to change systems? Does the system back up the data automatically or will you need to do this yourself regularly?
  • Can you print reports from the system easily? Can you download/save data or reports etc easily from the system?
  • Does it meet any accessibility needs you may have?
  • Do you need the product to have a Welsh translation?
  • Do you want a system that links to your bank account and automatically downloads transactions?
  • Do you have any particular requirements in terms of functionality of the product?
  • How many transactions do you have each quarter? Is there a limit on the number of transactions (for example, per month or per quarter) the software will allow? Do you anticipate the number of transactions to increase as your business grows?
  • Is the product useful for any other aspect of your business?
  • Is the product fully compatible with your hardware/other software?
  • Are software updates done automatically or do you (as the user) need to regularly check for programme updates?

Bridging software

Bridging software will enable those using spreadsheets for record-keeping to link to HMRC’s computer systems and submit the required quarterly update information.

2. Submit quarterly updates

You will need to submit quarterly updates to HMRC to declare business/property income and expenses for the period covered by the update. The intention is for the reports to be automatically generated by the record-keeping system, so this should not be an onerous process. The periods will be cumulative, so updates will be due for the following periods each tax year:

  1. 6 April to 5 July (due by 7 August)
  2. 6 April to 5 October (due by 7 November)
  3. 6 April to 5 January (due by 7 February)
  4. 6 April to 5 April (due by 7 May)

As can be seen from the above, the due date for submission of the quarterly update will be 7th day of the following month. Each submission effectively supersedes the previous one.

It is possible to elect for the update periods to tie in with a month end if this is more convenient and your software allows you to do so. This is sometimes called a ‘calendar quarters’ election. If you make this election, the periods become:

  1. 1 April to 30 June (due by 7 August)
  2. 1 April to 30 September (due by 7 November)
  3. 1 April to 31 December (due by 7 February)
  4. 1 April to 31 March (due by 7 May)

Note that the due dates for the submissions do not change.

The election must be made before the first update of the tax year to which you want it to apply is submitted. 

Example - making a ‘calendar quarters’ election

If Elsa is mandated into MTD from April 2027 and she wants to do calendar quarter updates she must make the election in her software before the update for the period 1 April 2027 to 30 June 2027 is submitted. 

It remains in place unless you decide to change back to standard update periods. If you do decide to change back, the calendar update election must be cancelled in your software before the first update of the tax year for which you want to revert back to standard update periods is submitted. 

Example - cancelling a ‘calendar quarters’ election

If Sammi has been in MTD since April 2026 and elected to submit calendar period updates for the 2026/27 tax year but has now decided that he would rather revert back to standard update periods for the 2027/28 tax year he must cancel his calendar period election in his software before the update for the period 6 April 2027 to 5 July 2027 is submitted. 

If you are within MTD and have both property income and self-employment income you will need to submit separate quarterly updates for each source, so you will need to do quarterly updates for self-employment income and expenses and also quarterly updates for property income and expenses, unless you are taking advantage of one of the property income easements. See our section Reporting property income under MTD for income tax for more on this.

3. Finalise your tax position for the tax year

As part of the finalisation process you will need to make any adjustments to your income and expenses in your software to arrive at the final taxable profit for the accounting period of the business.  This may involve submitting amended quarterly updates. See GOV.UK for more information on this.

You will also need to inform HMRC of any other taxable income in the tax year and make a final declaration to confirm the information provided is complete and correct and that you have finalised your income tax position as part of the tax return process. It is likely this will need to be done through software in due course. It replaces the completion of the traditional self assessment tax return.

Gross income

We explain what gross income is when you are self-employed in our Calculating self-employed profits section.

We explain gross income when letting property in our Working out property income section.

If you are self-employed and receive property income, the gross annual income figure above applies to total gross income from both sources.

Example – calculating annual gross income

Charlie is a self-employed painter and decorator. The self-employed section of his 2024/25 tax return shows the following:

Gross income     £42,320

Expenses             £27,622

Net profit            £14,698

He also receives rental income from a property he inherited a few years ago when his parents died. His rental income and expenses shown on his 2024/25 tax return are as follows:

Rental income £10,000

Expenses             £2,450

Net profit            £7,550

As Charlie has gross income from self-employment of £42,320 and gross rental income of £10,000 his total gross income from both sources is £52,320. Therefore as this is more than £50,000 he will have to follow the MTD rules from April 2026. 

When working out your gross income from self-employment or property letting activities, remember that if any deductions are made from the income before you receive it, your gross income amount is the amount before the deductions are made. To see how this works, see the examples below.

Example – gross income when self-employed

Yani is self-employed as a cycle delivery rider. He receives regular income payments from the platform he works through, after they deduct their charges. In March 2025, £1,300 was paid into his bank account. This was after fees of £200 were deducted by the platform before he was paid. His actual earnings were as follows:

  • Earnings: £1,500
  • Platform fees: £200
  • Received in bank: £1,300

Yani’s gross income is £1,500. The platform fees of £200 are a business expense to be claimed in his self-employed accounts in due course.

Example – gross income when property letting

Martha rents out a property in the UK. The property is managed by letting agents on her behalf. Each month, she receives a payment from the agents, which is the rental income after the agents have deducted their fees. In March 2025, Martha received a payment of £820, as follows:

  • Rent paid by tenant: £1,000
  • Letting agent fees: £180
  • Received in bank: £820

Martha’s gross income is £1,000. The letting agent fees of £180 are an expense of the letting to be claimed in her property rental accounts in due course. 

Exemption

You will not be required to comply with Making Tax Digital (MTD) for income tax in certain circumstances:

  • If you do not have a UK National Insurance number on 31st January prior to the start of the tax year, you will be automatically exempt for that tax year (although you will be expected to comply with MTD if you are in scope if you eventually obtain an National Insurance number).
  • You are a foster carer or shared lives carer  and your only income is qualifying care income.
  • If you are VAT registered AND you have been granted exemption from Making Tax Digital for VAT by HMRC, you will be automatically exempt.

Digital exclusion

It will also be possible to apply for exemption from Making Tax Digital (MTD) if you are digitally excluded – for example, you have an unreliable broadband connection, disability prevents you from using computers, you live in a remote location with poor broadband access, etc.

The law states that a person is digitally excluded if for any reason (including age, disability or location) it is not reasonably practicable for them to use electronic communications or to keep electronic records.

You can also apply for exemption if you are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records.

While your application for exemption from MTD is being considered by HMRC, you are not required to comply with the MTD rules.

The process for claiming exemption has not yet been confirmed by HMRC, but it is expected that it will be possible to make an application for exemption from October 2025. We will update this page once more information becomes available. If you are automatically exempt from MTD (as explained above) you do not need to apply for exemption.

HMRC’s current guidance on applying for exemption from MTD is available on GOV.UK.

Getting prepared

If you know now that your gross income will be more than the MTD threshold and that you are in scope of the MTD rules from April 2026 and will not be exempt, there are two main steps you need to take so you are ready for when the new rules apply to you:

Step 1: Choose your software - whether that is a full accounting package, a simplified accounting package aimed at smaller businesses, a spreadsheet together with a bridging product, or an app.

Step 2: Sign up for MTD – you do this online here:  Sign up voluntarily for Making Tax Digital for Income Tax - GOV.UK

You may notice this page says ‘sign up voluntarily’ in the title. This is because you need to sign up on this page if either

  • you must comply with MTD from April 2026 and so you want to sign up so you are registered for MTD in good time - in which case you choose to sign up for the 2026/27 tax year as part of the sign up process
  • you want to join MTD early so you can be part of the testing process (see our heading HMRC’s testing process below) – in which case you choose to sign up for the 2025/26 tax year as part of the sign up process.

Please note that although the guidance says you need your business start date or the date that you first started to receive property income in order to sign up, you actually only need this if your start date was within the last two years.

If you have more than one MTD ‘source’ of income, (for example you are self-employed and have rental income, or have two self-employments) you need to sign up both sources of income as part of the overall sign up process,

Once you’ve signed up, you should get a message on screen to confirm you’re ready to use Making Tax Digital for Income Tax. You will not receive an email but HMRC will write to you with confirmation.

HMRC’s testing process

If you want to, you might be able to join MTD before your legal start date (see Your start date section above) and help HMRC test the new system. It will also give you the opportunity to become familiar with the new rules before you are mandated to use it. HMRC are looking for volunteers who are in a position to start complying with MTD for the 2025/26 tax year.

You should check that your software provider is happy for you to sign up to the testing phase before doing so in case they are not ready for you to join the testing phase.

There are some limited circumstances which cannot be dealt with in the testing phase and therefore as part of the sign up journey you will effectively be checked against the system’s eligibility criteria. Provided you meet the eligibility criteria and have appropriate software then you should be able to join the testing phase.

Those who start MTD in HMRC’s testing phase will be able to access specific specialist support from HMRC’s specially trained customer support advisers.

More information

There is lots of information on GOV.UK about Making Tax Digital. See Making Tax Digital for Income Tax - GOV.UK

We expect HMRC to provide further help and support in due course and we will update this page when more information becomes available.

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