Get ready for Making Tax Digital

Signing up for MTD for Income Tax is currently voluntary.

However, if you’re a landlord or sole trader and you receive income from property or self-employment then you’ll need to register and comply with MTD for Income Tax before 2028.

The date that you’ll need to comply is based on your income:

• By the 6 April 2026 if you earn over £50,000
• By the 6 April 2027 if you earn over £30,000
• By the 6 April 2028 if you earn over £20,000

Remind yourself how to prepare for MTD

Digitising your taxes is not just about efficiency - it’s also essential for staying compliant with Making Tax Digital legislation. Businesses must take proactive steps like:

• Choosing MTD compatible software: ensure your software and tools meet HMRC requirements for digital record-keeping and submissions.
• Keeping digital records: keep invoices, receipts and other documents in digital form to be ready for audit.
• Submitting returns electronically: file returns using compatible software, like FreeAgent, to reduce errors and avoid penalties.

For MTD for VAT, penalty points are issued for late filings. They accrue based on how overdue they are and the number of late submissions.

For MTD for Income Tax, penalties only apply when MTD becomes mandatory based on your income. Until then, you don’t need to sign up.

HMRC may apply penalties for MTD for Income Tax:

• If you're required to register and you miss the deadline.
• For missed or incorrect quarterly updates. Or, for failing to keep digital records.
• For missing required deadlines (for updates, returns or digital record keeping) even if you join any pilot or voluntary phase.

MTD for VAT is now mandatory for all VAT-registered businesses. This means keeping digital records and filing VAT returns using MTD compatible software - whatever the size of business.

If you register for VAT now, HMRC will automatically sign you up for MTD.

Not all companies have to comply with MTD for Income Tax just yet. You’ll have to comply by April 2028 depending on your qualifying income.

See HMRC's MTD for VAT guidance

Which taxes does Making Tax Digital impact?

Both VAT and income tax fall within the scope of Making Tax Digital. HMRC have confirmed that corporation tax won’t fall under the MTD scope.

What’s the difference between VAT and income tax?

• VAT is added at each part of production or distribution of a product, it’s a consumption tax.
• The income tax paid by a sole trader or unincorporated landlord is based on profits earned above the personal allowance.

Since the 1st April 2022, all VAT registered businesses have been required to comply with MTD for VAT (regardless of their turnover).

This means they must keep digital records and submit VAT returns using MTD compatible software.

All VAT-registered businesses should now be signed up for Making Tax Digital for VAT.

If you’re newly registering for VAT, HMRC will sign up your business to MTD for VAT automatically. This won’t be the case if you’re exempt or have applied for exemption.

There are a few ways you could make your business more digital, alongside your tax submissions.

• Digital banking: if you’re a sole trader or limited company with up to two owners, Mettle could help you bank digitally. It’s created by NatWest and is a free, mobile-first digital bank for businesses.
• Create a business website: if you don’t already have a website for your business, you could be missing out on new markets. If you do have one, have you considered other ways to do business online like offering workshops or online events?

Explore becoming more digital