Making Tax Digital for Income Tax
Get Ready for April 2026
Big changes are coming to self-assessment tax returns. From April 2026, Making Tax Digital for Income Tax (MTD) becomes mandatory for thousands of sole traders and landlords across the UK. Instead of one annual tax return, you'll need digital records and quarterly updates submitted through approved software.
If this sounds overwhelming, you're not alone. AccountingBliss helps sole traders and landlords across Derby, Coventry and the Midlands get MTD ready with the right software, proper setup and ongoing quarterly support. We handle the complexity so you can focus on your business.
• What is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) is HMRC's digital transformation of the tax system. For income tax, it means keeping digital business records and submitting quarterly updates instead of just one annual self-assessment return.
Under MTD, you'll need to:
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Use MTD-compatible software to record all business income and expenses digitally
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Submit quarterly summaries of income and expenses to HMRC (four times yearly)
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Keep digital records with no manual copying or re-typing allowed
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Complete a final digital tax return by 31 January (same deadline as now)
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Make tax adjustments, claim reliefs and report other income at year-end
Think of it as moving from annual paper based tax returns to real-time digital reporting throughout the year. The annual 31st January deadline stays the same, but you'll be providing HMRC with quarterly updates along the way.
• Who Needs to Comply with Making Tax Digital?
MTD for Income Tax is being rolled out in phases based on your gross income
(income before expenses):
• Phase 1: From 6 April 2026
Sole traders and landlords with gross income over £50,000 in the 2024/25 tax year must start using MTD from April 2026. This includes combined income from self-employment and property, for example, £30,000 self-employed income plus £25,000 rental income = £55,000 in total, so you're in Phase 1.
• Phase 2: From 6 April 2027
Sole traders and landlords with gross income over £30,000 in the 2025/26 tax year must start using MTD from April 2027.
• Phase 3: From 6 April 2028
Sole traders and landlords with gross income over £20,000 in the 2026/27 tax year must start using MTD from April 2028.
The threshold is based on your tax return filed just before each tax year starts. For April 2026, HMRC will look at your 2024/25 return (due 31 January 2026) to determine if you're in scope.
• Who is Exempt from MTD?
Some individuals can claim exemption from MTD requirements:
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Those digitally excluded due to age, disability, religious beliefs or remote location
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Non-UK residents (until at least April 2027)
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Foster carers and non-UK resident performers
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Those without a National Insurance number on 31 January
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Partnerships (for now - rules may change)
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Income below the relevant threshold
To claim digital exclusion exemption, you must apply to HMRC and demonstrate you genuinely cannot comply due to specific circumstances. We can help assess whether exemption applies and handle the application process.
• How Does Making Tax Digital Work in Practice?
MTD changes how you report income and expenses throughout the year...
• Quarterly Updates (Four Times Yearly)
You'll submit digital summaries of income and expenses every quarter to HMRC. These aren't mini tax returns, they're straightforward totals of what you've earned and spent that quarter. Deadlines are one month and seven days after each quarter ends:
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Quarter 1 - 6 April - 5 July : Due by 7 August
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Quarter 2 - 6 July - 5 October : Due by 7 November
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Quarter 3 - 6 October - 5 January : Due by 7 February
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Quarter 4 - 6 January - 5 April : Due by 7 May
You can choose calendar quarters (April-June, July-September, etc.) to align with your accounting dates if preferred.
• Year-End Finalisation
After your fourth quarterly update, you'll finalise your tax position by 31 January (same deadline as current self-assessment). This is where you make tax adjustments, claim allowances and reliefs and report other income like PAYE, interest or dividends. The quarterly updates will pre-populate into your final return, avoiding duplicate data entry.
• Digital Record Keeping
All business transactions must be recorded digitally using MTD-compatible software or spreadsheets with bridging software. Once information is entered, it must be transferred to HMRC digitally, no manual copying, re-typing or copy-paste allowed. This is called maintaining 'digital links.'
• What Happens if You Miss MTD Deadlines?
MTD introduces a new points-based penalty system for late quarterly submissions:
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Each missed quarterly update = 1 penalty point
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Each missed final declaration = 1 penalty point
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Once you reach 4 points = £200 penalty
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Additional penalties for continued lateness
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Points reset after a period of compliance
This replaces the current fixed £100 late filing penalty for self-assessment. The points-based system is designed to penalise persistent lateness rather than occasional missed deadlines, but it's still crucial to stay on top of quarterly reporting.
• Can I use spreadsheets for MTD or do I need software?
Spreadsheets can work with MTD if combined with bridging software that submits data digitally to HMRC. You cannot manually copy spreadsheet data to HMRC forms it must transfer digitally. Full accounting software like Xero or QuickBooks handles everything seamlessly but costs more. We help you choose the right approach for your needs.
• How much extra work is MTD compared to current self-assessment?
MTD requires four quarterly submissions instead of one annual return, meaning more frequent record-keeping. However, if you maintain digital records throughout the year, each quarterly update is straightforward. The year-end return becomes easier because quarterly data is already submitted. The total work may be similar but spread throughout the year rather than concentrated in January.
• What if I miss a quarterly MTD deadline?
Missing quarterly deadlines results in penalty points. Each missed quarterly update or final declaration = 1 point. At 4 points, you receive a £200 penalty, with additional penalties for continued lateness. Points reset after periods of compliance. Submit quarterly updates on time to avoid penalties.
• Does MTD apply to limited companies?
No, MTD for Income Tax applies to sole traders and landlords only. Limited companies aren't affected by these April 2026 changes. However, MTD for Corporation Tax is expected in future years, requiring similar quarterly digital reporting for companies.
• What software do you recommend for MTD?
We're certified partners in Xero and QuickBooks - both are excellent MTD-compatible platforms. Xero suits most small businesses with its balance of features and price. QuickBooks works well for those wanting integrated payroll. For very simple affairs, bridging software with spreadsheets may suffice. We assess your needs and recommend the best fit.
• How AccountingBliss Helps You with Making Tax Digital
Making Tax Digital doesn't have to disrupt your business. AccountingBliss provides complete MTD support for sole traders and landlords across Derby, Coventry and the Midlands:
• MTD Readiness Assessment
We review your current situation, confirm your MTD start date, assess whether exemptions apply and identify what changes you'll need to make. You'll know exactly where you stand and what action to take.
• Software Setup and Training
We recommend the right MTD-compatible software for your business, set it up correctly, connect it to your bank accounts and train you on how to use it effectively. As certified Xero and QuickBooks partners, we provide expert implementation and ongoing support.
• Quarterly Update Services
We handle your quarterly MTD submissions, ensuring accurate reporting and timely filing before each deadline. You provide receipts and invoices quarterly, and we prepare and submit your MTD updates to HMRC. No penalties, no stress.
• Digital Record Keeping
If you prefer full bookkeeping support, we maintain your digital records monthly or quarterly, categorise all transactions correctly and ensure everything is MTD-compliant throughout the year. Your records are always audit-ready.
• Year-End Tax Returns
We complete your final digital tax return by 31 January, making all necessary tax adjustments, claiming reliefs and allowances, and reporting other income sources. The quarterly data we've already submitted pre-populates, making year-end faster and simpler.
• Ongoing Support and Advice
MTD questions arise throughout the year. We provide unlimited email and phone support, answering queries about software, deadlines, digital records or compliance requirements. You're never left guessing.
Get MTD-Ready with Expert Support
Making Tax Digital is coming whether you're ready or not. The April 2026 deadline is approaching fast and preparation takes time. Don't wait until the last minute to figure out software, digital records and quarterly reporting.
AccountingBliss makes MTD compliance straightforward. We assess your situation, recommend the right software, provide expert setup and handle quarterly submissions so you stay compliant without the stress.
Contact us today for a free MTD readiness consultation. Discover exactly what Making Tax Digital means for your business and how we can help you prepare properly.
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Chartered Accountant Expertise
All MTD work is overseen by qualified Chartered Accountants who understand both the technical requirements and practical implementation. You receive expert guidance, not just software setup.
02
Xero and QuickBooks Certified Partners
We're certified in both leading MTD platforms, providing professional setup, training and ongoing support. We know these systems inside-out and ensure they're configured correctly for your needs.
03
Fixed Fee MTD Services
Transparent pricing for quarterly updates and annual returns. No hourly billing or surprise charges. You'll know your monthly or quarterly cost upfront, making budgeting straightforward.
04
Proactive Deadline Management
We track all quarterly deadlines and ensure submissions happen on time. You'll never face MTD penalties due to missed deadlines when we're handling your compliance.
Why Choose us
for MTD Compliance?
