What Is Making Tax Digital (MTD) and When Does It Affect You?
HMRC is moving all self-employed people and landlords to Making Tax Digital from April 2026. Here is what it means and what you need to do.
What Is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's plan to move the UK tax system online. Instead of filing a Self Assessment tax return once a year, self-employed people and landlords will need to submit quarterly digital updates to HMRC and keep digital records throughout the year.
Who Is Affected and When?
MTD for Income Tax (MTD ITSA) is rolling out in stages:
| From | Who Is Affected |
|---|---|
| April 2026 | Self-employed people and landlords with income over £50,000 |
| April 2027 | Self-employed people and landlords with income over £30,000 |
| April 2028 | Self-employed people and landlords with income over £20,000 |
If your combined self-employment and rental income exceeds these thresholds, you will need to comply.
What Changes Under MTD?
Instead of one annual Self Assessment return, you will need to:
- Keep digital records — paper records and spreadsheets alone will not be acceptable
- Submit quarterly updates — four times per year (every three months)
- Submit an end-of-year declaration — confirming your final figures
The quarterly updates are summaries of your income and expenses — not full tax returns. The final calculation still happens at the end of the year.
What Counts as Digital Records?
You must use HMRC-recognised software to keep your records. This means:
- Recording every transaction digitally
- Categorising income and expenses correctly
- Submitting directly to HMRC via software (not manually)
Pivitax is designed with MTD compliance in mind. Your receipts, expenses, mileage, and income are all recorded digitally and categorised throughout the year — exactly what MTD requires.
What Happens If You Do Not Comply?
HMRC will introduce a points-based penalty system for late submissions. Points accumulate for each missed deadline, and once you reach a threshold, a financial penalty is applied.
Do You Still Need to Do Self Assessment?
In the first phase of MTD, you will still file a final declaration (similar to Self Assessment) at the end of the year. The annual return as we know it will eventually be replaced, but for now both exist.
What Should You Do Now?
- Check whether your income will exceed the threshold
- Start keeping digital records — even if you are not yet required to, building the habit now saves stress later
- Choose software that is HMRC-recognised for MTD
- Speak to an accountant if your income is close to the threshold
Summary
Making Tax Digital requires digital record-keeping and quarterly submissions to HMRC. If you earn over £50,000 from self-employment or rental income, it affects you from April 2026. If you earn over £30,000, it affects you from April 2027.
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