Accountants and tax advisors

A quick guide to Making Tax Digital for income tax

07 November 2025

Making Tax Digital for Income Tax (MTD) is a new way for sole traders and landlords to report their income and expenses to HMRC. It requires you to keep digital records of self-employment and property income throughout the year and submit them in quarterly returns, with a final declaration by 31st January of the following year.

This needs to be done through commercial software that supports MTD. If you or your accountant already uses compatible software, you may be able to connect existing records.

Who will be required to use it?

If you have qualifying income from self-employment or property, or both, you will be legally required to use MTD software from:

6 April‌‌‌ 2026, for total qualifying income from property and/or self-employment of over £50,000
6 April‌‌‌ 2027, for total qualifying income from property and/or self-employment of over £30,000
6 April‌‌‌ 2028, for total qualifying income from property and/or self-employment of over £20,000

If your total qualifying income is less than £20,000, you do not need to adopt MTD.

What is qualifying income?

The total income received from self-employment, UK and foreign property.

If you do not have this type of income, you will not need to use the new system. If you are not sure if you qualify, then please discuss this with an accountant.

Are there any penalties?

There will be a new penalty system in place for MTD. It will apply from the tax year on which you start using MTD, and the old system remains for previous years. Please see the current guidance at Penalties for Making Tax Digital for Income Tax volunteers, although there may be further changes once the system comes into effect.

Do I have to pay for software?

There are free options available, which have basic functions to keep and edit records, submit quarterly updates and annual returns. The government website has a tool to find software based on your needs and price range.

Can I be exempt from using it?

There are plans to exempt or defer certain taxpayer groups. For example, if you are ‘digitally excluded’ and it’s not reasonable for you to use MTD due to age, a health condition, disability, religion or lack of internet access.

The system does not come into effect until 6 April 2026, or later, depending on your qualifying income as set out above. You can start using it now voluntarily to prepare in advance; however, you will still need to submit an annual tax return as usual for the 2025/26 tax year. Please note that if you do decide to use MTD now, you will be subject to the new penalty system.

Check if you’re eligible here.

For a step-by-step guide and more information, please see the collection on GOV.UK.

Eurotax West is a certified accounting and tax advisory service based in Hammersmith, London.

We have been operating since 2010 and have kept a consistent client base throughout this period. We focus on providing a quality service for our clients and tailor to their needs.