The transition to digital tax reporting is changing how individuals and businesses manage their finances. One of the key elements of this transformation is Making Tax Digital (MTD) for Self Assessment.
This change will affect self-employed individuals and landlords by requiring them to maintain digital records and report income to HMRC using approved software.
With MTD set to roll out in phases beginning in April 2026, it’s important to understand what this change means and how to prepare for it. This guide will help you stay compliant and informed every step of the way.
What Is Making Tax Digital (MTD) for Income Tax?
Making Tax Digital for Income Tax is part of a government initiative to modernise the tax system. It aims to make the process of submitting income tax returns more efficient, more accurate, and easier to manage by using digital methods.
Instead of filing annual Self Assessment tax returns, taxpayers will need to maintain digital records and submit quarterly updates to HMRC.
This digital-first approach is designed to reduce errors and improve transparency in tax reporting. MTD has already been implemented for VAT, and its extension to income tax will impact millions of taxpayers across the UK.
What Does MTD for Self Assessment Involve?
MTD for Self Assessment involves major changes in how income is recorded, reported, and submitted to HMRC. Under the new system, eligible individuals will be required to use HMRC-approved software to:
- Keep digital records of business and/or property income
- Submit quarterly updates of income and expenses
- File an End of Period Statement (EOPS)
- Complete a final declaration confirming income for the tax year
This replaces the current annual Self Assessment tax return. The goal is to simplify tax management and improve real-time reporting.
Those affected will need to adjust their current processes, either by using MTD-compatible accounting software or working with a professional who does. Compliance means going fully digital, with no more paper-based records.
Why Is MTD Being Rolled Out by HMRC?
HMRC is introducing MTD as part of its long-term strategy to improve the efficiency and reliability of the UK’s tax system.
The main reasons for this rollout include:
- Error reduction: Minimising mistakes that occur in manual record keeping and submissions
- Improved compliance: Encouraging accurate and timely tax reporting
- Enhanced transparency: Offering a clearer overview of income and tax liabilities
- Support for taxpayers: Providing a better experience with the right digital tools
By digitising the tax process, HMRC aims to bring greater accountability and fewer delays in handling tax data. It’s not just a technology upgrade but a structural change in the way taxes are managed in the UK.
When Is MTD for Self Assessment Mandatory?
MTD for Income Tax becomes mandatory from April 2026 for self-employed individuals and landlords with combined gross income over £50,000 per year.
From April 2027, this will extend to those earning over £30,000 annually. This marks the start of a phased approach to bring more taxpayers into the digital system over time.
Anyone falling within these income thresholds will need to start keeping digital records and submit quarterly updates through compatible software.
If your income is below £30,000, MTD will not yet apply, but future phases may include you. Preparation ahead of the deadline is key to avoiding disruptions.
Who Needs to Follow MTD Rules for Self Assessment?
Understanding who must comply is essential to avoiding penalties and ensuring smooth reporting. The following groups are required to follow MTD rules starting from April 2026:
- Self-employed individuals earning over £50,000
- Landlords with gross rental income above £50,000
- Individuals with combined property and self-employment income exceeding £50,000
- From April 2027 – Those earning between £30,000 and £50,000
Exemptions may apply to:
- People who cannot use digital tools due to age, disability, or geographical remoteness
- Those with incomes below the threshold
- Non-residents and certain trustees
Each person’s eligibility is calculated based on their total gross income from all relevant sources for a tax year. Partnerships and individuals with income below the threshold remain outside the scope for now but may be included in future expansions.
How Will the MTD Rollout Be Phased Until 2026?
The MTD rollout will occur in structured phases to help taxpayers transition smoothly. Initially, only those earning over £50,000 from self-employment or property income will be required to join from April 2026.
The second phase will bring in individuals with income between £30,000 and £50,000 from April 2027. Those earning below £30,000 will not be required to join during these early stages.
However, HMRC is conducting a review to determine whether and when smaller income groups and partnerships will be brought into the scheme. This phased approach allows businesses and individuals to adapt gradually to digital reporting.
What Are the Key Deadlines and Quarterly Reporting Dates?
Under MTD, eligible taxpayers must submit quarterly income updates along with an annual End of Period Statement (EOPS) and a Final Declaration. The reporting periods and deadlines are shown below:
| Reporting Period | Submission Deadline |
| 6 April – 5 July | 5 August |
| 6 July – 5 October | 5 November |
| 6 October – 5 January | 5 February |
| 6 January – 5 April | 5 May |
These quarterly updates replace the traditional once-a-year tax return, making it easier for HMRC and taxpayers to keep track of tax obligations throughout the year. Each update must include income and expenses recorded using MTD-compatible software.
What Software Do You Need for MTD Compliance?
To comply with MTD, taxpayers must use HMRC-approved software that allows them to maintain digital records and submit updates. This software must support:
- Quarterly submissions
- End of Period Statements
- Final Declarations
There are several free and paid MTD-compatible tools available, depending on your business size and needs.
Some software providers offer bridging tools that work with spreadsheets, but they still need to be fully compliant with MTD submission standards. Choosing the right software is crucial for long-term compliance.
How Can Small Businesses and Sole Traders Prepare for MTD?
Small businesses and sole traders should take proactive steps to get ready before the 2026 deadline. Being prepared will avoid last-minute stress and ensure smooth adoption.
Review Current Record Keeping
- Switch from manual records to digital formats
- Test out compatible software early
Choose the Right Software
- Pick MTD-compliant tools that fit your business needs
- Look for user-friendly features and HMRC integration
Work With Professionals
- Seek help from an accountant or bookkeeper
- Ask for guidance on software and submission procedures
Stay Informed
- Keep track of changes and deadlines
- Join the MTD pilot if you meet the criteria
Preparation is key to avoiding disruptions in your tax processes. Begin early and consider professional support to ease the transition.
Is There a Pilot Scheme for MTD and How Can You Join?
Yes, a pilot scheme is available for those who want to try MTD before it becomes mandatory. Individuals with compatible income types and access to MTD software can voluntarily join the pilot programme. This allows users to test the system and gain familiarity before the full rollout.
Participants must meet eligibility requirements, including specific income sources and software use. Joining the pilot offers a valuable opportunity to experience the process firsthand, identify any issues early, and build confidence in managing digital tax submissions.
Conclusion
MTD for Self Assessment represents a significant shift in how income tax is reported in the UK. With the phased rollout starting in April 2026, now is the time to understand your obligations and prepare.
From choosing the right software to maintaining digital records, each step will help ensure you meet compliance standards and avoid unnecessary penalties.
Embrace the change early and make the transition to digital tax management a seamless one.
Frequently Asked Questions
How will MTD affect paper-based tax submissions?
Paper-based submissions will eventually be phased out. HMRC will require most taxpayers to submit digital tax returns through MTD-compliant software.
Can I still use spreadsheets under MTD rules?
Yes, but only if they are linked with bridging software that can send data digitally to HMRC in the correct format.
What happens if I miss an MTD submission deadline?
Missing deadlines can result in penalties or fines. HMRC is introducing a points-based system for non-compliance starting from the MTD rollout.
Is there any financial support for small businesses implementing MTD?
Currently, no specific grants exist, but HMRC offers free guidance, and some software providers offer free versions for smaller users.
Will MTD for Corporation Tax follow after Self Assessment?
Yes, HMRC plans to extend MTD to Corporation Tax, but this is not expected until 2027 or later.
What if I earn below the MTD threshold?
If your income from self-employment and/or property is below £30,000, you are currently exempt, but this may change in future phases.
Are partnerships included in the MTD for Income Tax changes?
Partnerships are not required to join in April 2026. HMRC plans to include them in a later phase of the MTD rollout.
