Making Tax Digital for Income Tax (MTD for IT) forms part of the government’s plan to digitalise the UK tax system. MTD for IT will come into effect in April 2026, and it will change the way self-employed people submit their income tax returns.

Self assessment goes digital from April 2026. All self-employed people with a turnover (income before expenses) above £50,000 will need to have compatible software in place by this date. From 2027, self-employed people with a turnover (income before expenses) above £30,000 will also need to follow MTD for IT rules. And, from April 2028, those with a turnover (income before expenses) above £20,000 will need to comply with MTD for IT rules, too.

From April 2026, those that are impacted by MTD for IT will need to use MTD-compatible software to keep digital records and submit updates to HMRC for MTD for IT.

This means you’ll no longer be able to use the online HMRC portal, or the paper (mail) filing system if you're a self-employed person earning above £50,000.

In the space of one tax year, you’ll need to send:

• Four quarterly updates, using your MTD-compatible software

• One final declaration, by January 31st

Quarterly updates

Your quarterly updates should include details of your income and expenditure for each quarterly period. These updates will be cumulative, so you can correct errors or make amends to previous submissions in your next update. They can be quickly pulled together in your cloud-based accounting software, providing you keep your digital records up to date.

Final declaration

You’ll need to disclose any additional sources of income, such as savings and investment, in your final declaration. You can also submit claims for reliefs.

Digital record-keeping

Keeping digital records is a breeze with cloud-based accounting software like Quickbooks, Free Agent, Sage or Xero. By connecting your bank account, you can automatically import your transactions and see where your finances stand at a glance. With handy apps you can reconcile transactions complete with receipts from your phone.

Making Tax Digital for Income Tax forms part of HMRC’s wider vision to digitise the tax system, and make it easier to get your tax right. With a digitised system that’s easier for taxpayers to use, HMRC aims to reduce the margin of error and close the tax gap that currently stands.

As more people rely on digital tools to run their businesses, HMRC hopes to bring the tax system in line with the modern, digital economy.

Once you’re past the initial learning curve of MTD-compatible software, quarterly updates don’t take as long to compile. You’re only submitting a quarter’s worth of information, which is automatically compiled by your software based on your digital records, and can be submitted directly to HMRC. The updates are cumulative too – which means you don’t need to send additional submissions to correct errors or make adjustments.

This is instead of the old system where you would report income and expenditure for the whole tax year in one return, manually calculating your figures from a year’s worth of paper or Microsoft Excel records. This means you can spend more time focusing on your business, and less time snowed under with admin.

Your quarterly updates also provide a near-real-time view of your finances, so HMRC can send an estimation of how much tax you owe. This estimate can help you prepare for your tax bill ahead of time. According to HMRC, MTD for VAT users say the new system makes it easier to prepare and submit returns.

When it comes to accounting software, the benefits don’t stop at MTD. Using a platform such as Quickbooks, Free Agent, Sage or Xero, you get real-time insights into the financial health of your business. Features such as invoicing and receipt capture mean you can manage multiple financial admin tasks from one platform.