HMRC says it’s all about helping businesses get their tax right. The main reason they’re doing this? Too much tax gets lost each year because of simple mistakes and errors. Going digital should fix a lot of that. 

Right now, every business that’s registered for VAT has to be MTD compliant. That’s already happening.

For Income Tax, it’s coming for self employed people and landlords based on their turnover:

• From April 2028: if you make over £20,000
• From April 2026: if you make over £50,000
• From April 2027: if you make over £30,000

If you meet the requirements, then no, it’s mandatory. But there are some exemptions:

If you’re digitally excluded because of age, disability or living somewhere remote
Religious societies get an exemption
If you’re insolvent
If you’re registered as providing qualifying care (like foster carers)

When you’ve got the right software and process in place, MTD actually makes things easier:

• You can see all your tax obligations clearly
• Everything’s online in one place
• You and your accountant can work together more easily
• Planning and budgeting becomes much simpler

VAT businesses are already doing it. Any new VAT registrations automatically get signed up.

For Income Tax, the dates depend on your income:

• April 2026 if your turnover is over £50,000
• April 2027 if it’s over £30,000
• April 2028 if it’s over £20,000

For Income Tax, you don’t have to wait until 2026. You can actually volunteer to start from April 2025 as part of HMRC’s testing phase. Just go to:

www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax

If you’re registering for VAT, you’ll automatically be signed up for MTD. Nothing extra needed. 

You’ll need accounting software that can keep your records digitally and send quarterly updates directly to HMRC. 

 We’ve tested all the main options and Xero consistently comes out on top for being easy to use and is HMRC approved MTD compliant software. 

No, HMRC won’t be giving out free software. They suggest talking to your accountant or bookkeeper about what works best for your business. You can check out HMRC’s website for a list of approved options, but honestly, with FreeAgent free through Dead Simple Accounting, you’re already sorted. 

For now, yes. HMRC wants to bring in MTD for partnerships and limited companies eventually, but they haven’t announced when that’s happening yet. 

Don’t panic. Because your quarterly updates are cumulative (they build on each other), you don’t need to refile old ones. Just correct the mistake in your next update or when you do your final tax return. HMRC expects some differences between quarterly updates and your final figures anyway, since you don’t need to include all the tax adjustments until the end. If you’re consistently making big errors though, HMRC might start asking questions. 

You get one free pass in any 24-month period. After that, each late quarterly update gets you a penalty point. Hit two points and you’ll get a £200 fine, plus another £200 for each late submission after that until you get back on track. It’s basically the same system as MTD for VAT if you’re already doing that. 

Once you’re in MTD, you need to stay below the threshold for three full tax years before you can leave. So if you go over £50k p.a. once, you’re committed for a while even if your income drops the next year. The only quick exit is if you stop trading completely. 

Possibly, but you’ll need to apply for digital exclusion and have a genuine reason. Being uncomfortable with technology or the cost alone won’t cut it. You’ll need something like age, disability, or genuinely no internet access where you live or work. If you have an accountant who can do everything digitally for you, HMRC might say you don’t need an exemption. 

 If you’re a sole trader in the construction industry (CIS), you’ll still need to do quarterly updates if you’re over the threshold. Most people find it easier to stick to 5 April year-ends for CIS to keep the paperwork simpler. Your CIS deductions will show up in your final tax calculation.