TL;DR
- Making Tax Digital (MTD) is HMRC’s programme to move tax reporting from annual paper-based returns to digital records and regular digital submissions.
- MTD for VAT has been mandatory for most VAT-registered businesses since 2019 and is well established.
- MTD for Income Tax Self Assessment (ITSA) is being phased in by income level: mandatory from 6 April 2026 for gross income over £50,000, from 6 April 2027 for over £30,000, and from 6 April 2028 for over £20,000.
- A new points-based penalty system applies to late submissions, with a £200 fine once four penalty points accumulate.
- 38,000 people a month search for this term in the UK, at effectively no ranking competition, making it one of the most valuable content gaps available.
What Making Tax Digital actually is
Making Tax Digital is HMRC’s long-running programme to modernise how UK businesses and individuals report tax, replacing annual paper-based returns with digital record-keeping and more frequent digital submissions. It isn’t a single deadline or a single tax, it’s a phased rollout across different tax types, with MTD for VAT already established and MTD for Income Tax Self Assessment (MTD for ITSA) now being phased in by income level.
For a business already running an ERP or accounting system, MTD is mostly a software compatibility question: your records need to be kept digitally and your submissions need to go through HMRC-recognised software, rather than being retyped into HMRC’s online portal from a spreadsheet.
MTD for VAT: already in force
MTD for VAT has applied to most VAT-registered businesses since 2019, requiring digital records and VAT return submission through compatible software. If your business is already VAT-registered, this part of MTD is likely already handled by whatever accounting or ERP system you use, provided that system is HMRC-recognised.
MTD for Income Tax: the phased rollout that matters right now
This is the part of MTD most UK sole traders, landlords and small business owners are currently working out whether, and when, applies to them. The rollout is based on gross qualifying income (self-employment and/or property income, before expenses), not profit, and is being phased in by threshold: from 6 April 2026 for gross income over £50,000, from 6 April 2027 for gross income over £30,000, and from 6 April 2028 for gross income over £20,000.
Once in scope, a business needs to keep digital records and send quarterly updates to HMRC, followed by a final declaration by 31 January after the tax year ends, replacing the single annual Self Assessment return with a more continuous reporting cycle. Missing a quarterly update or the final declaration deadline earns a penalty point under HMRC’s new points-based system, with a £200 fine triggered once four points accumulate.
What this means practically for a growing UK business
If your business is approaching any of the MTD for ITSA thresholds, or already sits above the VAT registration threshold covered in our VAT registration guide below, the practical step is the same either way: confirm your accounting or ERP platform is HMRC-recognised for the specific MTD obligations that apply to you, and start keeping digital records now rather than at the point you’re legally required to.
FAQ
Is Making Tax Digital only for VAT?
No. MTD for VAT has applied since 2019, but MTD is also being phased in for Income Tax Self Assessment (MTD for ITSA), and further extensions to other tax types may follow.
Do I need to register for MTD myself?
HMRC identifies who is in scope based on your Self Assessment returns and will generally write to you, but it’s worth checking your own eligibility using HMRC’s tools rather than waiting, particularly as thresholds lower over the next few years.
What happens if I miss a quarterly update?
Each missed quarterly update or final declaration earns a penalty point under HMRC’s points-based system. A £200 fine applies once four points accumulate.
Does MTD replace my annual tax return entirely?
For MTD for ITSA, quarterly updates replace the single annual submission of income and expense totals, but you still submit a final declaration each year that confirms your figures, similar in spirit to the old Self Assessment return.
Can I join Making Tax Digital voluntarily before I’m required to?
Yes, voluntary sign-up is available if your income is below the mandatory threshold, which can be a useful way to get used to quarterly reporting before it becomes a legal requirement.
Will the £20,000 threshold definitely go ahead in 2028?
It’s the currently planned threshold, but MTD’s rollout has been deferred before due to its complexity, so it’s worth checking HMRC’s latest guidance closer to the date rather than assuming the current plan is final.
