Making Tax Digital 2026: The Complete Guide for Beginners

Making Tax Digital (MTD) for Income Tax is the biggest change to UK tax reporting in decades. From 6 April 2026, hundreds of thousands of sole traders and landlords must start submitting quarterly digital updates to HMRC.

This guide covers everything you need to know.

What is Making Tax Digital?

MTD is HMRC's programme to move the UK tax system online. Instead of filing one annual Self Assessment return, you'll send HMRC summary updates four times a year using compatible software. The idea is to reduce errors, make tax reporting more timely, and give people a clearer picture of their tax position throughout the year.

Who is affected?

From April 2026: sole traders and landlords with income over £50,000. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028. Partnerships, limited companies, and those below the threshold are not yet affected.

What you need to do

1. Keep digital records — a spreadsheet, accounting software, or any digital tool that records your income and expenses
2. Submit quarterly updates — four times a year, send HMRC your total turnover and expenses using compatible software
3. File a Final Declaration — at the end of the tax year, confirm your figures and submit your annual summary (replacing the Self Assessment return)

What HMRC receives

Each quarterly update contains three numbers: your total turnover, your total expenses, and any other business income (usually zero). These are cumulative year-to-date figures. HMRC never sees your individual transactions.

Do I need accounting software?

No. You need compatible software to submit your figures, but that doesn't mean you need a full accounting platform. If you keep records in a spreadsheet, free bridging software like Flonancial will handle the submission for you.

The quarterly deadlines

For the standard April-to-April tax year, submissions are due roughly one month after each quarter ends: 7 August, 7 November, 7 February, and 7 May. The Final Declaration is due by 31 January of the following year.

Penalties

HMRC uses a points-based penalty system. Late submissions earn penalty points; once you hit 4 points, you get a £200 fine. However, there's a grace period for 2026/27 — no penalties for late quarterly updates in the first year.

Self Assessment vs MTD

MTD doesn't completely replace Self Assessment. You still file a Final Declaration at year-end (which is essentially the same information). The main change is the four quarterly updates throughout the year. Think of it as spreading your annual return across the year rather than doing it all in January.

How to get started

1. Sign up for MTD on gov.uk (allow up to 72 hours for processing)
2. Choose compatible software (Flonancial is free)
3. Connect to HMRC through the software
4. Submit your first quarterly update after 5 July 2026