Making Tax Digital for Income Tax is coming. Are you ready?

The government says it wants to make it easier for sole traders and landlords to “get their tax right”. HMRC also believes that making the UK tax system digital will prevent avoidable mistakes that cost the UK billions of pounds a year in lost tax.

You’ll be able to get ongoing estimates of tax you owe based on figures you’ve provided, so you can set aside enough money each month to pay your annual tax bill. The days of getting hit with a tax bill that’s far higher than you expected will be gone.
And you can also wave bye-bye to the stress of having to work out a full year’s income and costs when you’re completing your annual Self Assessment tax return and struggling to meet the filing deadline. Who needs that anyway?

For sole traders and landlords with taxable income of more than £50,000 a year, Making Tax Digital for Income Tax will be introduced from 6 April 2026. If you have taxable income of more than £30,000 you will be affected by MTD for Income Tax changes from 6 April 2027 and if you have taxable income of more than £20,000 you will be affected from 6 April 2028.

It’s unlikely, but you can apply for exemption from Making Tax Digital for Income Tax if using software to keep digital financial records or send data to HMRC digitally just isn’t practical, say, because of your age, a disability, your religion, poor internet connection or other justifiable reason. If HMRC accepts your reason, another way will be found.

Sorry, doesn’t matter. Unless you’re exempt, you must start using digital record-keeping and/or reporting software from 6 April 2026. Just because you hate computers and prefer paper financial records or forms won’t get you out of MTD for Income Tax requirements. And be warned. If you don’t comply, there are penalties.

● Unless you’re exempt, you must keep digital records of your taxable income and expenses/costs and send summary figures electronically to HMRC every quarter.
● At the end of the tax year, you must submit an EOPS (end of period statement) to HMRC digitally, confirming the accuracy of your submitted figures, with any accounting adjustments made (eg tax allowances or tax reliefs you’ve claimed).
● You must also make a final declaration, confirming any other income received. This final declaration replaces the Self Assessment tax return. HMRC will then tell you how much tax you owe.

You have two options:
1. MTD for Income Tax-compatible software that enables you to record and report data to HMRC as per MTD rules.
2. “Bridging software” that works with accounting software that isn’t MTD-compatible (including spreadsheets), enabling you to send the necessary figures in the right format to HMRC each quarter and at the end of the year.
Need to know! We’ve created our own MTD for Income Tax software. Sign up to Coconut now. It will make MTD much easier for you.

You’ll need to send a summary of your income and expenses digitally at the end of each quarter. You’ll get up to a month after the end of each quarter to do this. The standard quarterly periods and deadlines in each UK tax year are:

Need to know! As with the current system, under MTD for Income Tax, late submissions or late payments may result in penalty fines.

You must pay your MTD for Income Tax tax bill on or before 31 January in the following tax year. So, for the 2026/27 tax year, you must pay your tax bill on or before 31 January 2028.

Yes, an accountant, for example, can sign you up for Making Tax Digital for Income Tax and take care of your recording and reporting obligations, should you wish. Obviously, they’ll need the necessary MTD-compatible software or bridging software.

Yes! If you open a Zempler Bank business account, you can get Coconut completely free for 2 years. Coconut is fully HMRC‑recognised, simple to use, and handles digital record-keeping, quarterly updates, and everything you need for MTD.