What is Making Tax Digital & When Does It Start?

Understanding what is Making Tax Digital and when it applies to your business is becoming increasingly important for UK taxpayers. It's one of the most significant changes to tax administration in recent years, and the key point to be aware of is that there isn't a single start date for everyone. Different business types and income levels move to MTD at different times, so getting clear early on can help you stay compliant and avoid unnecessary penalties.

In this guide, we explain what MTD is, who it affects, and when you need to be ready.

What is Making Tax Digital?

Making Tax Digital is HMRC's programme to modernise the UK tax system by moving more record-keeping and reporting online. Under MTD, you can no longer manually type your tax calculations into HMRC's systems. Instead, your accounting records must be kept in a digital format, and information must be sent directly to HMRC through compatible software.

The aim of MTD is to improve accuracy, reduce errors, and provide a clearer picture of tax affairs throughout the year, rather than everything being dealt with at year end.

When does Making Tax Digital start?

MTD is being introduced in stages, with different start dates depending on the tax and the type of business involved. It is already live for VAT, and it's being phased in for Income Tax Self Assessment (ITSA) for sole traders and landlords.

Making Tax Digital for VAT (already in place)

If you're VAT-registered, MTD for VAT is now the norm. HMRC's guidance makes clear that VAT-registered businesses should keep VAT records and submit VAT Returns using compatible software.

Making Tax Digital for Income Tax (phased rollout)

MTD for Income Tax is for sole traders and landlords who report income through Self Assessment. HMRC confirms that this will become mandatory in phases, starting on 6 April 2026.

Current confirmed thresholds and dates are:

From 6 April 2026: if your qualifying income from self-employment and/or property is over £50,000.
From April 2027: extended to those with qualifying income over £30,000.
From April 2028: extended to those with qualifying income over £20,000.

Even if you don't receive a letter about your MTD obligations, it is still your responsibility to check what is required. To help, HMRC provides an online tool where you can verify if and when MTD for Income Tax applies to you.

What changes day-to-day under MTD?

Once your MTD for Income Tax obligations begin, you (or your accountant) will need to use compatible software to:

Keep digital records of income and expenses
Send quarterly updates to HMRC
Submit your end-of-year submission and finalise your tax position as normal

It's worth highlighting that quarterly updates are not the same as paying tax quarterly; they are only regular reporting points that help keep your records up to date. Your software will help guide you on the quarterly periods and deadlines.

What do you need to do now?

A few simple steps will keep you on track for your MTD obligations:

1. Work out what applies to you.

If you're a VAT-registered business, you're likely already using MTD for VAT. If you're a sole trader or landlord, now is the time to check your qualifying income and the relevant start date.

2. Choose the right software.

HMRC offers guidance on finding compatible software for MTD, along with an online tool to help you search for the best option. This might be a full accounting package, or “bridging” software that links existing spreadsheets to HMRC (useful if you're not ready to move away from spreadsheets entirely).

3. Get support early.

If you use an accountant, they can help you choose software, set up processes, and handle submissions as your agent.

Making Tax Digital is ultimately about building better habits around record-keeping and reducing avoidable errors, but the transition can feel daunting if your current bookkeeping is manual or spreadsheet-heavy. The good news is that you don't have to handle it alone.

At Keith Graham Chartered Accountants, we offer specialist VAT and Self Assessment tax services. Our experienced team can help with everything related to your MTD obligations, including setting up the appropriate software, preparing and sending your quarterly updates, and your end-of-year returns.

If you'd like to know more, please get in touch with our team.