Making Tax Digital for Income Tax and Self Assessment: A Complete Guide for UK Taxpayers

Written By Lawrence McClelland

Making Tax Digital (MTD) is coming, no matter what you may think of the new rules. There are changes which require some planning for the majority of self-employed and landlord taxpayers. In this guide, you’ll discover what MTD for Income Tax entails, who it affects, how to prepare and where to get expert support.

What Is Making Tax Digital (MTD)?

Making Tax Digital is HMRC’s drive to modernise the UK tax system by replacing manual processes with digital record-keeping and reporting. Under MTD for Income Tax:

  • Paper ledgers and standalone spreadsheets are no longer accepted, there must be a digital link to the filings.

  • This doesn’t mean spreadsheets are no longer an acceptable way to keep your books, but there must be software involved to file the figures from these spreadsheets. Contact Goldcrest to see how we can help with this step.

  • Quarterly updates are filed throughout the tax year. An annual Self Assessment return is still required in the normal timeframe.

Who Must Comply with MTD for Income Tax?

Sole Traders and Landlords

If you meet all of the following, you must comply with MTD for Income Tax:

  • You trade as a sole trader or receive rental income.

  • You’re registered (or should be registered) for Self Assessment.

  • Your total turnover or rental income exceeds £50,000 in the 2024/25 tax year or £30,000 in the 2025/26 tax year. It is assumed that HMRC will bring in a lower threshold of £20,000 in relation to the 2026/27 tax year.

Exemptions and Deferrals

An exemption for the digitally excluded is included in the regulations and is similar to the current exemption under MTD for VAT. The exemption covers those that that do not use computers for religious reasons and those that are unable to comply because of age, disability or location (or for any another reason). The exemption must be applied for directly with HMRC.

If exempt, you may continue filing Self Assessment returns manually. HMRC is expected to issue further guidance on how to apply for exemption in advance of MTD income tax becoming mandatory in 2026. It will probably not be possible to apply until quite close to the start date.

Key Dates, Thresholds and Deadlines

Income Thresholds and Phased Roll-Out

MTD for Income Tax rolls out in stages based on your gross self-employment turnover or property income:

2024/25 turnover: £50,000; Start date for MTD: 6th April 2026

2025/26 turnover: £30,000; Start date: 6th April 2027

2026/27 turnover: £20,000; Start date: 6th April 2028 (Subject to legislation)

You can sign up voluntarily ahead of your mandatory date to gain confidence with the digital processes.

Reporting Deadlines

Under MTD, you’ll submit four quarterly updates and one Final Declaration:

  • Quarter 1 (6th Apr – 5th Jul): deadline 7th Aug

  • Quarter 2 (6th Jul – 5th Oct): deadline 7th Nov

  • Quarter 3 (6th Oct – 5th Jan): deadline 7th Feb

  • Quarter 4 (6th Jan – 5th Apr): deadline 7th May

  • Final Declaration: by 31st January following the tax year end and alongside the normal Tax Return.

Businesses will be able to elect to use month end dates as their quarterly period ends.

Digital Record-Keeping Requirements

HMRC-Approved Software

To comply with MTD for Income Tax, you must use software that:

  • Records income, expenses and transaction dates digitally.

  • Creates unique identifiers for customers, invoices or receipts.

  • Maintains unbroken digital links when exporting or transferring data.

Goldcrest Accountancy recommends Xero as cloud accounting software due to its ease of use, but we have experience using all sorts of software. We can also help move your records from one piece of software to another if you wish to try something different. Goldcrest also has access to specialist bridging software which allow digital filings from records contained within spreadsheets. Call today on 01904 222 088 to discuss your requirements.

Steps to Prepare Your Business for MTD

1. Choose the Right Software for you

Assess your needs: multi-user access, bank account integration, ease of use or continuity, select an HMRC-approved solution which is best for you long-term.

2. Migrate and Test Your Records

Import historic data, connect your bank feeds and run test reports on your new software to ensure seamless digital links.

3. Review Your Bookkeeping Processes

Implement consistent expense categorisation and invoice numbering to maintain accurate digital records.

4. Schedule Reporting in Your Calendar

Block out time each quarter for filings and ensure your Final Declaration is filed ahead of the 31st January deadline.

How Goldcrest Accountancy Can Help

Expert Guidance and Support

At Goldcrest Accountancy, we have experience of assisting sole traders and landlords with their MTD transition. We offer:

  • A tailored software assessment and set-up service.

  • Hands-on MTD help for you and your staff.

  • Let us complete the quarterly filings and Final Declaration for you. We can be as hands-on as you require.

Software Setup and Ongoing Compliance

We handle the technical migration, configure your system for digital links, and generate your quarterly MTD submissions. Our proactive monitoring flags potential issues, ensuring you never miss a deadline.

Transparent Pricing and Dedicated Assistance

Our fixed-fee packages mean no hidden costs. You’ll work directly with us to ensure you get all the help you need.

Let us simplify Making Tax Digital for your business or property portfolio. Contact Goldcrest Accountancy today or call us on 01904 222 088.

Frequently Asked Questions (FAQ)

Do I have to sign up for MTD even if I’m under the turnover threshold?

No. You can apply for voluntary registration if you want to but you aren’t required to apply MTD rules if your turnover is below the threshold in the previous tax year. However, early adoption helps you familiarise yourself with digital processes and avoid last-minute rushes so contact us to discuss your needs.

Can I still use my existing spreadsheet?

Spreadsheets must be digitally linked to MTD-compliant software. Unlinked spreadsheets are not acceptable but we have access to specialist software which can do the job for you. Give Lawrence a call on 01904 222 088 to see how we can help.

What happens if I miss a quarterly deadline?

Late-filing penalties apply. We recommend setting automated reminders and working with us to ensure timely submissions.

Do I have to pay tax quarterly?

No. The MTD filings are simply to report income and expenses to HMRC. Tax payments are still made through the usual Tax Return.

Contact us today

Ready to make the move? Book your free MTD consultation with Goldcrest Accountancy today and secure peace of mind for your tax affairs.

Lawrence McClelland
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