Making Tax Digital is changing the accountancy landscape. Practices of all sizes are being brought on a journey to digital-first tax returns.
While it’s a big step for many practices, it’s more straightforward when we break down the process.
You’ll already be preparing and submitting VAT reports under MTD, as part of the United Kingdom government’s modernisation of the tax system.
However, MTD for income tax applies to income tax self-assessment, often abbreviated to MTDfITSA, or MTDfIT, as we’ll refer to it.
Originally, MTD for income tax was planned to launch in April 2018 this was then pushed back several times and is now set to be mandated in 2026 or 2027—depending on the taxpayer's threshold. The change will affect those with over £50,000 in income per year in 2026, moving to £30,000 in 2027. Plus, all sole traders and landlords with a total gross income of over £20,000 will now also be mandated to comply with MTD—the timescale for this is to be announced by the end of the current Parliament.
This will affect more than four million self-assessment taxpayers across the United Kingdom.
What will the process look like?
Watch our step-by-step video, explaining what’s expected from you as part of MTD, and how to fulfil obligations for clients.
MTD for income tax intends to help people budget for their tax bill more effectively and reduce the element of human error. Keeping digitised tax records and making quarterly submissions to HMRC should help taxpayers and accountants do just that. However, it’s vital that accountancy practices have HMRC-compatible software in place to comply—long before the April 2026 deadline. This will help accountants, and their clients, take advantage of the opportunities of MTD.
eBook: Your MTD for income tax Guide
Download our new eBook, Your MTD for income tax guide, to help guide you through the MTD journey. In this guide, we’ll set out the key steps your practice should take to comply with MTD.
In the run up to the April 2026 deadline you’ll need to understand its requirements and prepare both your practice and your clients.
This eBook covers:
- The basics of MTD for income tax.
- Understanding reporting obligations.
- How to prepare.
- Your FAQs, answered.
- How Wolters Kluwer can help.
Under MTD, the Self-Assessment will be replaced with new reporting obligations.
These are: the Quarterly Submissions and the Final Declaration.
Your new reporting obligations under MTD
Quarterly Submissions
Four reports in each accounting period will be the minimum requirement under MTD.
The income and expense figures should be calculated from original digital records—stored either via bookkeeping and accounting software or in a spreadsheet.
A business that aligns to the tax year (6 April – 5 April) would need to submit at least the following reports for the 2026/27 financial year:
- 1st: Due by 7 August 2026 (covers 6 April 2026 – 5 July 2026)
- 2nd: Due by 7 November 2026 (covers 6 July 2026 – 5 October 2026)
- 3rd: Due by 7 February 2027 (covers 6 October 2026 – 5 January 2027)
- 4th: Due by 7 May 2027 (covers 6 January 2027 – 5 April 2027)
Final Declaration
Previously known as crystallisation, the Final Declaration brings together the details of all other factors. This includes business and non-business income, which will determine the taxpayer’s final tax liability for the tax year.
Unlike the Quarterly Submissions, you only need to submit one Final Declaration per taxpayer—not per business. This replaces the usual Self-Assessment tax return.
Taxpayers must submit a Final Declaration by 31 January, following the end of the tax year.
Digital links
A digital link also applies to recapturing or modifying the data when moving it between two digital places.
HMRC says it will accept the following digital links:
- emailing a spreadsheet containing digital records, so the information can be imported into another software product
- transferring a set of digital records onto a portable device (e.g. pen drive, memory stick, flash drive) and physically giving this to someone else, who then imports that data into their software
- XML, CSV import and export, download and upload of files
- automated data transfer
- an API transfer
- A digital link also includes linked cells in spreadsheets. For example, if you have a formula in one sheet that mirrors the source's value in another cell, then the cells are linked.
Why Wolters Kluwer is your trusted software partner for MTD
Wolters Kluwer enables tax and accounting professionals and businesses of all sizes to drive productivity, navigate change, and deliver better outcomes. This is why we’re a trusted partner for your MTD journey.
Our solutions are optimised by technology and guided by deep domain expertise, as we aim to help you grow, manage, and protect your clients during this journey to the digitalisation of tax.
Wolters Kluwer remain committed to delivering a MTD for income tax solution to support customers taking part in HMRC’s Public beta program starting in April 2025. As the go-live dates have been confirmed by the Government during the autumn 2024 budget, we now have certainty around MTD, I encourage anyone who has clients who meet the threshold, to consider joining the HMRC pilot. This will help you understand and refine the MTD process ahead of mandation.
- Dorcas Mbwiti, Senior Product Manager at Wolters Kluwer
MTD for income tax FAQs
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What is Making Tax Digital (MTD)?MTD is the government’s initiative to digitalise the tax system, primarily through digital records. It’s thought it’ll make it easier for companies and individuals (sole traders) to get their personal tax returns right. Making Tax Digital for income tax (MTDfIT) was planned to launch in April 2018 which was then pushed back several time. It is now set to be mandated in 2026 or 2027, depending on the taxpayer's threshold. The change will affect those with over £50,000 in income per year in 2026, moving to £30,000 in 2027.
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What key steps will ensure compliance with MTD?
- Digital records must be maintained on HMRC-compatible software.
- For each qualifying business, quarterly updates will need to be submitted to HMRC.
- A final declaration that includes all other taxable income should be submitted by the usual 31 January deadline.
- Tax should be paid as usual by the same deadline.
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Can accountants use their clients’ paper records to key into compatible software such as CCH, and what’s the deadline?If paper records are keyed into a spreadsheet and uploaded into CCH, this can be used to comply with MTD. Businesses are encouraged to record their business transactions in real time. However, the draft regulations don’t stipulate exactly when the data must be committed to digital records. There’s nothing to prevent bulk recording of transactions every few weeks, provided that quarterly data is recorded digitally before the submission is compiled and sent to HMRC.
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Does the turnover threshold of £50,000 and £30,000 apply to property and trade businesses added together, or to each business in isolation?The threshold applies to the individual taxpayer’s grand total in turnover, derived from all relevant businesses and properties. For example, within a financial year, if a client receives £25,000 income from their sole trader business and £15,000 from rental income as a landlord, they must follow MTDfIT rules when submitting their tax return.
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If the combined turnover is more than £50,000 per annum, should it include employment income too (for example £60,000 salary, £3,000 self-employment)?No. Income tax paid on employment income is already accounted for via the employer’s payroll arrangements.
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When a client registers for VAT, are they automatically enrolled into MTD?They aren’t enrolled automatically. It’s up to the accountant to enrol clients for relevant tax reporting schemes individually.
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What happens if an MTD deadline is missed?There will be a teething period, as people get used to the new procedures. This means that in the short term, we believe there will be a ‘soft touch’ approach. In the longer term, a points system will be introduced for all taxes. Each missed deadline will accumulate a point, and points may mean penalties. However, the dates and point thresholds of this scheme haven’t yet been published.
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