Making Tax Digital (MTD) for Earnings Tax is now obligatory for some sole merchants and landlords. It replaces annual record-keeping with a system that requires you to keep up digital data, ship quarterly updates to HMRC, and submit your tax return utilizing suitable software program.
The principles are being launched progressively, starting with these whose mixed gross revenue from self-employment and property exceeded £50,000 within the 2024 to 2025 tax yr. This threshold is about to be lowered to £30,000 in April 2027 and £20,000 in April 2028, bringing extra sole merchants and landlords into the scope of MTD.
This information explains when the MTD deadline applies to you, how qualifying revenue is calculated, the stories that you must submit and which software program may also help you comply.
What does qualifying revenue imply?
Qualifying revenue is your whole gross revenue from self-employment and property earlier than bills are deducted. It’s primarily based on the figures reported in your earlier Self Evaluation tax return and is usually known as your turnover.
In case you have multiple sole dealer enterprise or obtain each self-employment and property revenue, the overall of those quantities is taken into account your qualifying revenue. For instance, in case you earn £35,000 from your enterprise and obtain £20,000 in rental revenue, your qualifying revenue could be £55,000.
Qualifying revenue doesn’t embrace:
- Employment revenue taxed by PAYE
- Dividends, together with dividends taken from your personal restricted firm
- State or non-public pension revenue
- Your share of income from a partnership
- Most different revenue that isn’t derived from self-employment or property
Your share of the gross revenue from a collectively owned property usually counts. UK tax residents should additionally embrace qualifying revenue from abroad property. HMRC will evaluation the data in your tax return, however you might be answerable for checking whether or not you’ve got exceeded the related threshold.
MTD begin dates by revenue
The date you’re required to start out utilizing MTD depends upon your revenue throughout the latest tax yr. Listed below are the revenue thresholds:
- From 6 April 2026: In case your qualifying revenue was over £50,000 within the 2024 to 2025 tax yr
- From 6 April 2027: In case your qualifying revenue was over £30,000 within the 2025 to 2026 tax yr
- From 6 April 2028: In case your qualifying revenue was over £20,000 within the 2026 to 2027 tax yr
What are the important thing MTD reporting deadlines as soon as I’m mandated?
As soon as you might be in scope for MTD, you could hold digital data, ship 4 quarterly updates and submit your annual tax return utilizing suitable software program. The quarterly updates are summaries of your revenue and bills and don’t exchange your annual tax return.
Should you use commonplace tax-year quarters, you could file your quarterly updates by:
- 7 August 2026: deadline for Quarter 1 (6 April to five July)
- 7 November 2026: deadline for Quarter 2 (6 July to five October)
- 7 February 2027: deadline for Quarter 3 (6 October to five January)
- 7 Could 2027: deadline for Quarter 4 (6 January to five April)
Your tax return for the 2026 to 2027 tax yr have to be submitted by 31 January 2028. You have to nonetheless submit your 2025 to 2026 Self Evaluation return within the ordinary means by 31 January 2027.
Are there any MTD exemptions?
Not each sole dealer or landlord should use Making Tax Digital. You’re routinely exempt in case your qualifying revenue is £20,000 or much less. These with qualifying revenue above £20,000 however beneath the brink for the related yr is not going to want to affix till that decrease threshold takes impact.
Partnerships are additionally at present exterior the scope of MTD for Earnings Tax, though the federal government plans to carry them into the system at a later date.
Different automated or short-term exemptions apply in sure circumstances, together with to some trustees, private representatives, Lloyd’s underwriters and taxpayers claiming specific allowances or reliefs.
You’ll be able to apply to HMRC for an exemption if you’re digitally excluded. Which means your age, well being, incapacity or spiritual beliefs make it unreasonable so that you can use suitable software program. Being unfamiliar with accounting software program or discovering it costly is not going to, by itself, qualify you for an exemption.
HMRC has a full checklist of MTD for Earnings Tax exemptions.
MTD penalty delay
HMRC is not going to apply penalty factors for late quarterly updates in the course of the 2026 to 2027 tax yr. Nonetheless, you could nonetheless hold digital data and ship all 4 updates earlier than submitting your tax return.
This ‘smooth touchdown’ interval doesn’t take away the tax-return deadline or defend you from late-payment penalties. For subsequent tax years, missed submission deadlines shall be lined by HMRC’s points-based penalty system.
MTD software program suppliers
Sage
Sage is a cloud-based accounting device for small companies that’s listed by HMRC as suitable with Making Tax Digital. It has a free, MTD-ready plan for non-VAT-registered sole merchants that features 25 auto-categorised transactions, Self Evaluation help and revenue and expense administration. The premium plan consists of receipt seize, limitless transaction categorisation and the choice to attach a number of financial institution accounts.
Plans and pricing (excluding VAT):
- Sole Dealer Free – £0 monthly
- Sole Dealer – £7 monthly
Intro provide: 90% off for six months.
Get began with Sage
Xero
Xero has a variety of MTD-ready plans obtainable for VAT and non-VAT-registered companies. Each plan permits you to ship a restricted variety of quotes and invoices, auto-reconcile transactions (non-obligatory on entry-level plans), seize receipts and meet your MTD for Earnings Tax necessities. Greater tiers unlock better allowances for quotes and invoices, doc seize, money move forecasting and extra.
Plans and pricing (excluding VAT):
- Easy – £7 monthly
- Ignite – £16 monthly
- Develop – £37 monthly
- Complete – £50 monthly
- Final – £65 monthly
Intro provide: 90% off for six months.
Get began with Xero
Tide
Tide’s HMRC-recognised accounting software program is constructed proper into your checking account. It comes with an MTD toolkit that permits you to generate your Self Evaluation primarily based on tax estimates, put money apart in a devoted tax account, and file returns to HMRC through the Tide app. It additionally routinely categorises as much as 90% of your transactions and automates quarterly tax updates.
There are 3 ways to entry Tide’s MTD instruments:
- Join your enterprise checking account – Tide’s MTD options can be found at no cost to sole merchants with a Tide enterprise account. Clients of third-party financial institution accounts may also join through open banking.
- Join your accounting software program – you possibly can join your Tide account to your present accounting software program.
- Tide accounting subscription – Tide’s accounting plans vary from £19.99 to £24.99 plus VAT for restricted firms and £13.99 to £17.99 plus VAT for sole merchants.
Get began with Tide
Regularly requested questions
Does Making Tax Digital apply to restricted firms?
No. Making Tax Digital for Earnings Tax at present applies to people receiving qualifying revenue as sole merchants or landlords. It doesn’t apply to revenue earned by a restricted firm, though firms might have separate digital reporting obligations for VAT and different taxes.
Do landlords have to make use of Making Tax Digital?
Landlords may have to make use of MTD if their gross property revenue, mixed with any sole-trader revenue, exceeds the related threshold. This consists of UK and abroad property revenue, though some kinds of revenue and sure taxpayers could also be exempt.
Does Making Tax Digital exchange Self Evaluation?
MTD doesn’t take away the requirement to finish an annual tax return. As an alternative, it modifications how sole merchants and landlords hold data and report their figures. As soon as enrolled, you could use suitable software program to ship quarterly updates and full your annual tax return.
What data should I hold digitally?
You have to hold digital data of your self-employment and property revenue and bills. Every report ought to usually embrace the quantity, the date the revenue was acquired or the expense incurred, and the related revenue or expense class. Receipts and invoices can nonetheless be retained in paper type, offered the required data is recorded digitally.
What occurs if I’ve multiple enterprise?
You have to keep separate digital data and ship separate quarterly updates for every sole-trader enterprise. You additionally have to report property revenue individually from self-employment revenue. For instance, somebody working as each an electrician and a driving teacher would submit updates for every enterprise.
Can my accountant handle Making Tax Digital for me?
Sure. An accountant or tax agent can signal you up, handle your digital data, ship quarterly updates and full your annual return in your behalf. You must communicate to them earlier than deciding on software program to verify it’s suitable with the programs they use.
What occurs if my revenue falls beneath the MTD threshold?
You gained’t be routinely exempt from MTD in case your revenue falls beneath the brink. When you’ve been mandated, your qualifying revenue usually wants to stay beneath the relevant threshold for 3 consecutive tax years earlier than you possibly can select to decide out.
