The government’s Making Tax Digital (MTD) initiative continues to reshape how businesses manage and report their finances. From April 2026, MTD for Income Tax will begin rolling out, aiming to make tax administration more efficient, accurate, and easier for everyone to get right.
At Nordens, we’re here to help you understand what’s changing, who it affects and how you can prepare.
What is MTD for Income Tax?
MTD for Income Tax means that self-employed individuals and landlords will need to keep digital accounting records and submit quarterly updates to HMRC using approved software. Paper records or manual returns will no longer meet the legal requirement once the scheme becomes mandatory.
Why Is MTD for Income Tax Happening?
For years, many businesses relied on paper records or manual spreadsheets, which often led to errors, missed deadlines and inaccurate filings.
MTD aims to reduce these mistakes by encouraging taxpayers to keep records digitally and submit updates more regularly, giving both HMRC and business owners a clearer picture of their finances throughout the year.
In short, it’s designed to:
- Reduce human error by automating record-keeping and reporting
- Simplify tax compliance for individuals and small businesses
- Improve transparency and accuracy in how income is reported
- Save time for business owners through digital tools and real-time data
The government also hopes that more frequent reporting will help HMRC identify issues earlier, prevent unpaid tax, and support the UK’s shift toward a fully digital economy.
Although the transition may take time, the end goal is a smoother, smarter, and more efficient tax process for everyone.
When Does It Start?
MTD for Income Tax will be phased in gradually over three years:
- April 2026 – for those with income from self-employment and/or property over £50,000
- April 2027 – for those earning over £30,000
- April 2028 – for those earning over £20,000
This income is based on the combined turnover from self-employment and property. Partnerships are not yet included, but HMRC is expected to announce a date for them in future.
What Will You Need to Do?
If you fall within the MTD threshold, you’ll need to:
- Keep digital records of your income and expenses using MTD-compatible software
- Submit quarterly updates to HMRC (within a month of each quarter end)
- File an annual final declaration to confirm all your income for the tax year
This means you’ll move from filing one yearly Self Assessment tax return to submitting five reports per year – four quarterly updates and one year-end submission.
What’s Staying the Same?
The introduction of MTD won’t change:
- How income tax is calculated
- When you pay tax or how much you owe
- The types of income that must be declared
It simply changes how your tax information is recorded and sent to HMRC.
Digital Record-Keeping: What Counts?
Under MTD, you’ll need to use software that can connect to HMRC’s system through their API platform. Examples include Xero, QuickBooks, FreeAgent and other compatible tools.
You won’t need to scan paper receipts or invoices, but every transaction (not summaries) must be recorded digitally. HMRC encourages keeping records in real time, though quarterly input is acceptable.
If you already use spreadsheets, these can still be used – as long as they are linked to MTD-compatible software that can send information to HMRC digitally.
Deadlines for Quarterly Updates
If you use standard tax-year quarters, your submission dates will be:
| Quarter | Period Covered | Deadline |
|---|---|---|
| Q1 | 6 April – 5 July 2026 | 7 August 2026 |
| Q2 | 6 July – 5 October 2026 | 7 November 2026 |
| Q3 | 6 October – 5 January 2027 | 7 February 2027 |
| Q4 | 6 January – 5 April 2027 | 7 May 2027 |
You can also choose to align with calendar quarters (April–June, July–September, etc.), giving you slightly more time to submit.
Exemptions
Certain individuals and entities are exempt from MTD, including:
- Partnerships (until further notice)
- Trusts, estates, and non-resident companies
- Foster carers and those claiming qualifying care relief
- Individuals without a UK National Insurance Number
- People who cannot use digital systems due to age, disability, or location (digital exclusion exemption)
If you believe you may qualify for exemption, you’ll be able to apply directly to HMRC once further guidance is released.
Free Software Options
HMRC has promised free software for those with simple tax affairs – likely for unincorporated businesses below the VAT threshold with no employees. However, these tools are being developed by third-party providers, not HMRC itself, so details on functionality are still emerging.
Preparing for the Change
Here are practical steps to take now:
- Check your income – determine whether you’ll cross the MTD threshold.
- Review your accounting system – ensure your software is MTD-compatible.
- Start digital record-keeping early – this helps avoid stress when MTD becomes mandatory.
- Speak to your accountant – at Nordens, we can help you set up digital systems, choose the right software, and ensure smooth quarterly submissions.
Key Takeaway
MTD for Income Tax marks a major shift towards fully digital tax reporting. Although it may feel like a big change, starting early and working with your accountant will make the transition simple.
At Nordens, we’re helping clients prepare for MTD by reviewing systems, providing digital accounting solutions, and offering tailored guidance for landlords and the self-employed.
Need Help Getting Ready?
If you’re unsure whether MTD for Income Tax applies to you, or if you’d like support setting up your digital systems, get in touch with Nordens today.
