Making Tax Digital (MTD) Guide
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Making Tax Digital for Small Business - 2026 Guide
What Making Tax Digital actually means
Making Tax Digital, or MTD, is HMRC’s move toward digital record keeping and digital tax submission. For small businesses, that usually means using software to keep records up to date and submit information to HMRC electronically rather than relying on manual or last-minute methods.
For a lot of small business owners, the key point is this:
MTD is not just about filing. It is about how you keep records all year.
Who this affects right now
1) VAT-registered businesses
If your business is VAT registered, MTD for VAT is already the standard. HMRC says VAT-registered businesses should keep VAT records digitally and submit VAT returns using compatible software. New VAT-registered businesses are generally signed up automatically unless exempt.
2) Sole traders and landlords
MTD for Income Tax is now beginning in phases:
from 6 April 2026 - qualifying income over £50,000
from 6 April 2027 - qualifying income over £30,000
from 6 April 2028 - qualifying income over £20,000
HMRC’s guidance says this applies to total annual income from self-employment and property, not just profit.
3) Limited companies
For many small limited companies, MTD currently mainly affects VAT. As of now, the government has said the MTD model used for VAT and Income Tax Self Assessment will not be introduced for Corporation Tax.
What you’ll have to do under MTD for Income Tax
If you fall into MTD for Income Tax, HMRC says you, or your agent, must use compatible software to:
create, store and correct digital records of self-employment and property income and expenses
send quarterly updates to HMRC
submit your tax return information through the MTD process and pay tax due by 31 January following the tax year.
HMRC also says you should choose software before signing up.
The quarterly update deadlines
HMRC’s current guidance says the quarterly deadlines are:
7 August
7 November
7 February
7 May
For the 2026 to 2027 tax year, HMRC says there will be no penalty points for late quarterly updates in that first year for those newly mandated from 6 April 2026. But penalties can still apply for late tax returns and late payment.
That is helpful, but it is not a free pass. You still need proper records and still need to send the updates before you can complete the year-end process.