Making Tax Digital Checklist: How to Get Ready
Making Tax Digital is changing how UK sole traders and landlords keep records and report income to HMRC. Instead of one big tax return a year, you keep digital records and send short quarterly updates through software. This checklist walks you through getting ready step by step. It is general information, not tax advice, so confirm the details for your situation with HMRC or a qualified accountant.
Key takeaways
- MTD for Income Tax became mandatory on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, with lower thresholds following in April 2027 and April 2028.
- If you are in, you need digital records, compatible software, quarterly updates and a final declaration by 31 January after the tax year.
- Start early: choose software, connect your bank, and run a practice quarter before your first real deadline.
- Late submissions are handled by a points-based penalty system, so a simple deadline routine matters.
If you are self-employed or let out property in the UK, Making Tax Digital (MTD) is the biggest change to your tax admin in a generation. VAT-registered businesses have already been through it: MTD for VAT has applied to all VAT-registered businesses since April 2022. Now the same idea is rolling out to Income Tax Self Assessment.
The good news is that most of the work is a one-time setup. Once your records live in software and your bank feeds in automatically, a quarterly update is often a short task rather than a weekend of receipts. The checklist below takes you from "does this apply to me?" to "my first quarter is filed."
Step 1: Check whether MTD for Income Tax applies to you
MTD for Income Tax is being phased in by income level. It covers sole traders and landlords, and the test is your qualifying income: your gross self-employment income plus your gross property income, added together, based on an earlier tax year. Gross means before expenses, so this is turnover and rent received, not profit.
| Start date | Who must join |
|---|---|
| 6 April 2026 | Sole traders and landlords with qualifying income over £50,000 |
| April 2027 | Qualifying income over £30,000 |
| April 2028 | Qualifying income over £20,000 |
A few points people often miss:
- Employment income does not count. A salary from a job or a pension is not part of qualifying income. Only self-employment and property income count toward the threshold.
- The sources are combined. For example, a freelancer with £35,000 of turnover who also receives £20,000 of rent has qualifying income of £55,000.
- Partnerships and limited companies are not included in the phases running from 2026 to 2028. If you trade through a company, these Income Tax rules do not apply to the company.
- Some people are exempt or can apply for exemption, for example where it is not practical for them to use digital tools. Check HMRC's guidance if this might be you.
Pro tip
Even if your income is under the current threshold, look at the later dates. If you are likely to cross £30,000 or £20,000 soon, starting the switch to digital records now gives you a calm trial year instead of a rushed one.
Step 2: Understand what MTD actually asks you to do
MTD does not change how much tax you pay. It changes how you keep records and how often you report. Under MTD for Income Tax you need to:
- Keep digital records. Record each business income and expense transaction in software or a compatible digital tool, rather than on paper or in your head.
- Send quarterly updates. Every three months, your software sends HMRC a summary of your income and expenses for each business and each property business.
- Submit a final declaration. After the tax year ends, you confirm your full figures, add any other income and claim allowances and reliefs. This is due by 31 January after the tax year, the same date as the familiar Self Assessment deadline.
- Use compatible software. Submissions go through software that connects to HMRC, not through a manual web form.
Quarterly updates are summaries, not tax bills. You are not paying tax every quarter because of MTD. Your payment dates follow the normal Self Assessment rules, so check HMRC's guidance for how payments on account work in your case.
Common mistake
Thinking quarterly updates must be perfect. They are meant to give HMRC an up-to-date picture. You can usually correct errors in later updates or in the final declaration, so it is better to submit on time with your best figures than to miss the deadline polishing them.
Step 3: Choose compatible software
Software is the heart of MTD. You have two broad routes:
- Full bookkeeping software that records transactions, connects to your bank, stores receipts and submits to HMRC.
- Bridging software that links your existing spreadsheet records to HMRC, so you keep working in a spreadsheet but submit digitally.
Which one suits you depends on how you work today. If you already keep tidy spreadsheets and dislike change, bridging software can be enough. If your records are a mix of bank statements and a shoebox of receipts, full bookkeeping software with bank feeds will save the most time.
When you compare options, check these points:
- It appears on HMRC's list of software compatible with MTD for Income Tax.
- It supports every income type you have, such as self-employment, UK property and foreign property.
- It handles both quarterly updates and the final declaration, or you have a plan for the final declaration.
- It supports VAT returns too if you are VAT-registered.
- Your accountant can access it, if you use one.
Step 4: Get your records digital
Once you have software, set it up properly. A careful first setup prevents most of the stress later.
- Separate business and personal money. If you do not have one already, open a separate account for business income and spending. It makes bank feeds far cleaner.
- Connect your bank feed. Link your business account so transactions flow into the software automatically.
- Set up categories. Match your expense categories to the ones HMRC uses on the self-employment and property pages, so quarterly summaries are straightforward.
- Decide how you capture receipts. Many apps let you photograph a receipt on your phone and attach it to the transaction.
- Set up each income source. Create a separate business in the software for each trade and for your property income.
- Enter opening balances. If you are switching mid-way, bring in figures from the start of the tax year so the year is complete.
Example
Imagine a landlord with two flats and a part-time photography business. She sets up one property business and one self-employment business in her software, connects her business bank account, and creates a simple rule so rent from each tenant is coded automatically. Her photography expenses are captured by snapping receipts on her phone. At the end of the first quarter, her update takes about an hour, mostly spent checking a handful of uncategorized transactions.
Step 5: Sign up and authorize your software
If MTD is mandatory for you, HMRC expects you to sign up for MTD for Income Tax and then authorize your chosen software to connect to your HMRC account. The process involves your Government Gateway login, and the exact steps can change, so follow the current instructions on GOV.UK.
If you use an accountant or bookkeeper, they may sign you up and authorize software on your behalf as your agent. Agree clearly who does what: who records transactions, who checks them and who presses submit each quarter.
Pro tip
Keep a note of the date you signed up, the software you authorized and who has agent access. If something goes wrong with a submission, those three facts are the first things you or your adviser will need.
Step 6: Build a quarterly routine
The quarterly rhythm is where MTD becomes either painless or painful. A simple routine keeps it painless:
- Weekly, 10 minutes: categorize new transactions and attach receipts while you still remember what they were.
- Monthly, 30 minutes: reconcile your bank feed, chase missing receipts and review anything unusual.
- Quarterly: check the summary figures, then submit the update well before the deadline.
- After year end: make any adjustments, add other income and allowances, and submit the final declaration by 31 January.
Put every quarterly deadline in your calendar with a reminder two weeks ahead. Check the exact quarterly dates on GOV.UK, since your software will also show them, and note whether you have chosen standard quarters or calendar quarters if the option applies to you.
How penalties work
MTD for Income Tax uses a points-based system for late submissions. Each missed deadline earns a point, and a financial penalty is charged once you reach a set number of points. Points can expire if you keep a clean record for a period. Late payment of tax is treated separately from late submission. The details are set by HMRC, so read the current penalty guidance rather than relying on memory.
What gets easier with MTD
- A clearer view of profit during the year
- Fewer surprises when the tax bill arrives
- Less January panic, because the year is mostly done
- Records your accountant can access directly
What takes more effort
- Four deadlines a year instead of one
- Learning and paying for software
- Regular bookkeeping habits, not a once-a-year sort
- Keeping track of penalty points
Step 7: Do a practice run
Before your first real deadline, run through a full quarter in your software. Categorize every transaction, review the summary and compare it with your bank statements. If your software or HMRC offers a way to test or join early, consider it, because the first submission is where most problems appear: missing authorizations, the wrong business type set up, or income sources that were never added.
If you work with an accountant, ask them to review the first quarter with you. A short review now is much cheaper than unpicking a year of miscategorized expenses later.
Your Making Tax Digital checklist
- Add up gross self-employment and property income to find your qualifying income
- Note which start date applies to you: April 2026, 2027 or 2028
- Check whether any exemption might apply to your situation
- Choose software from HMRC's list of compatible products
- Open a separate business bank account if you do not have one
- Connect bank feeds and set up categories for each income source
- Decide how you will capture and store receipts
- Sign up for MTD for Income Tax and authorize your software
- Agree roles with your accountant or bookkeeper
- Add every quarterly deadline and 31 January to your calendar
- Run a practice quarter before your first real submission
Frequently asked questions
Do I still need to file a tax return under MTD?
Instead of the traditional return, you submit a final declaration through your software after the tax year ends, by 31 January. It plays the same role: it confirms your final figures and lets you add other income, allowances and reliefs.
Can I keep using spreadsheets?
Yes, in many cases. You can keep your records in a spreadsheet and use bridging software to send the updates to HMRC. The records still need to be digital and the submission must go through compatible software.
Does MTD for Income Tax apply to my limited company?
No. The phases from 2026 to 2028 cover sole traders and landlords. Limited companies and partnerships are not included in those phases, though a company that is VAT-registered already follows MTD for VAT.
Will I pay tax every quarter?
Not because of MTD. Quarterly updates report income and expenses; they are not payment demands. Your payment dates follow the normal Self Assessment rules, so check HMRC's guidance or ask your adviser how they apply to you.
Related reading
The bottom line
Making Tax Digital rewards owners who prepare early. Work out your qualifying income, pick compatible software, get your bank feed and categories set up, and build a short weekly and quarterly routine. Once that is in place, each update becomes a quick check rather than a scramble.
Thresholds, dates and penalty rules can change, so treat this as a general guide and confirm the current requirements on GOV.UK or with a qualified accountant before you make decisions.
