HMRC Making Tax Digital
Making Tax Digital — complete guide for UK businesses
MTD for VAT is already mandatory. MTD for Income Tax Self Assessment (ITSA) is rolling out from April 2026. Here is what every sole trader, landlord and small business needs to know — and what compliant software must do.
What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's programme to move UK tax records and submissions entirely digital. Businesses must keep records digitally and file tax returns through HMRC-recognised software. MTD for VAT is mandatory for all VAT-registered businesses. MTD for Income Tax Self Assessment is being phased in from April 2026 for sole traders and landlords above the income threshold.
MTD ITSA — rollout timeline
HMRC is introducing Making Tax Digital for Income Tax Self Assessment in three waves based on gross income from self-employment or property.
April 2026
Income over £50,000
Sole traders and landlords with gross income above £50,000 from self-employment or property.
April 2027
Income over £30,000
Sole traders and landlords with gross income above £30,000.
April 2028
Income over £20,000
Sole traders and landlords with gross income above £20,000.
Who needs MTD-compatible software?
Sole traders
If you are self-employed with gross income above the threshold, you must use MTD-compatible software to keep quarterly digital records and submit updates to HMRC.
Landlords
Landlords with rental income above the threshold are included in MTD ITSA. Each property business must be recorded digitally; quarterly updates are submitted to HMRC.
VAT-registered businesses
All VAT-registered businesses must already use MTD for VAT. If your taxable turnover exceeds the VAT registration threshold (£90,000), MTD VAT is already mandatory for you.
Construction & CIS subcontractors
Self-employed subcontractors under CIS with qualifying income above the threshold must also comply with MTD ITSA — on top of existing CIS obligations.
What MTD-compatible software must do
Digital record-keeping
Record all income and expenses digitally throughout the year. Spreadsheets bridged manually no longer satisfy MTD ITSA requirements.
Quarterly updates
Submit a summary of income and expenses to HMRC at least four times a year — within one month of each quarter end.
End-of-period statement
Confirm final figures and make adjustments at the end of the tax year, replacing the traditional annual Self Assessment return.
Direct HMRC API connection
Software must connect directly to HMRC's APIs. Finovo is HMRC-recognised for MTD VAT and MTD ITSA — no bridging software, no manual re-keying.
Not sure if MTD applies to you?
Answer three quick questions to find out whether you need MTD-compatible software and when your deadline falls.
Making Tax Digital — frequently asked questions
- Is MTD for VAT already mandatory?
- Yes. MTD for VAT has been mandatory for all VAT-registered businesses since April 2022. You must keep digital records and file VAT returns through HMRC-recognised software — bridging spreadsheets or manual re-entry do not comply.
- What is MTD for ITSA and when does it start?
- MTD for Income Tax Self Assessment (ITSA) replaces the annual Self Assessment return with quarterly digital updates. It starts for sole traders and landlords with income over £50,000 from April 2026, over £30,000 from April 2027, and over £20,000 from April 2028.
- Can I still use a spreadsheet for MTD?
- Spreadsheets alone do not qualify for MTD ITSA. You need software that connects directly to HMRC's APIs. Some bridging tools can link a spreadsheet for MTD VAT, but MTD ITSA requires full digital record-keeping in recognised software from the start of your obligation date.
- Does MTD ITSA apply if I am both employed (PAYE) and self-employed?
- MTD ITSA thresholds apply only to your gross income from self-employment and property. PAYE employment income is not counted. If your self-employed or rental income exceeds the threshold, you need MTD software regardless of your PAYE income.
- Is Finovo recognised by HMRC for Making Tax Digital?
- Yes. Finovo is HMRC-recognised software for MTD for VAT and MTD for Income Tax Self Assessment. It submits quarterly updates and end-of-period statements directly to HMRC's APIs — no bridging software or manual steps.
MTD-ready from day one
Start a free trial. Finovo keeps digital records, files quarterly updates and submits directly to HMRC — covering MTD VAT and MTD ITSA in one subscription.