Making Tax Digital, explained without the jargon
MTD is HMRC's biggest shake-up of the UK tax system in a generation — and it's landing on hundreds of thousands more sole traders and landlords from April 2026. Here's exactly what's changing, when it hits you, and how to be ready before it does.
What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's move to digitalise tax reporting. Instead of keeping records on paper or in a standalone spreadsheet and filing once a year, you keep digital records and submit updates to HMRC through approved software, more regularly. It already applies to VAT. From April 2026, it starts applying to Income Tax too — first for higher earners, then working down through lower thresholds over the following two years.
It isn't a new tax and it doesn't change how much you owe — it changes how and how often you report the figures you'd be reporting anyway.
When Making Tax Digital applies to you
MTD is rolling out in phases. Find your situation below.
- VAT-registered businessesLive since April 2022
- Sole traders & landlords, qualifying income over £50,000From 6 April 2026
- Sole traders & landlords, qualifying income over £30,000From 6 April 2027
- Sole traders & landlords, qualifying income over £20,000From 6 April 2028
- Limited companies (Corporation Tax)No date set
"Qualifying income" means your total gross income from self-employment and/or property before expenses, based on the figure on your tax return for the previous tax year — not your profit. If you're close to a threshold, it's worth checking now rather than waiting for HMRC to write to you. MTD for Corporation Tax was originally floated for larger companies but HMRC confirmed in its 2025 Transformation Roadmap that it's not going ahead on that timeline — there's no live date, and a separate approach is still being developed. If that changes, we'll update this page.
Two things: how you keep records, and how you file
MTD has two working parts, and it's worth being clear on both before you assume you're covered.
- Digital record-keeping — your income and expenses need to be recorded digitally as you go, in MTD-compatible software. A shoebox of receipts, or numbers typed into a spreadsheet with no digital link to your filing, no longer counts on its own.
- Digital submission — for VAT, that's your usual VAT return, filed through software instead of HMRC's old portal. For Income Tax, it's quarterly updates of income and expenses, plus an End of Period Statement and a Final Declaration each year, replacing the single annual Self Assessment return.
Do you need to act now, soon, or not yet?
Already in MTD
If you're VAT-registered, you should already be keeping digital VAT records and filing through compatible software. If you're not, HMRC can charge penalties for non-compliance now, not just from 2026.
Your date is coming
Sole trader or landlord with qualifying income over £50,000? You're in from April 2026. Over £30,000? April 2027. Over £20,000? April 2028. HMRC will normally write to confirm your start date based on your last tax return.
Not affected yet
Employees with no self-employment or property income, and limited companies filing Corporation Tax, aren't in scope yet. Worth reviewing again if your income is climbing or MTD for Corporation Tax gets a date.
How the MTD penalty points system works
MTD for Income Tax uses a points-based penalty system, not an instant fine for every late submission — but it adds up faster than people expect.
- Miss a submission deadline (a quarterly update or your annual return) and you get one penalty point.
- Reach 4 points and HMRC issues a £200 penalty — and another £200 for every further missed deadline after that, for as long as you're at the threshold.
- Points expire automatically after 24 months, as long as you stay under the 4-point threshold.
- Once you've hit 4 points, clearing them requires a run of 12 consecutive on-time submissions and bringing any outstanding filings up to date first.
Separate penalties still apply for paying tax late, calculated as interest plus a percentage of the tax owed the longer it goes unpaid. The points system is specifically about missed submission deadlines, not late payment.
How Buzz gets you MTD-ready
- 1We check your position
We confirm whether you're in scope now, in 2026, in 2027, in 2028, or not yet — based on your actual income, not guesswork.
- 2You get compatible software, included
Every Buzz plan includes FreeAgent, HMRC-recognised for MTD. No separate software subscription, no bolt-on cost.
- 3We move your records over
Bank feeds, receipt capture and digital record-keeping set up properly from day one, so nothing falls through the gap when your date arrives.
- 4We handle the submissions
Quarterly updates, End of Period Statements, Final Declarations or VAT returns — filed on time, so those penalty points never start stacking up.
Plans begin at £19.99 a month
A digital-first approach to bookkeeping and tax, with the software and support built in from day one — no separate MTD project to run.
Common questions about Making Tax Digital
Do I need to do anything about MTD right now?
If you're VAT-registered, yes — MTD for VAT has been mandatory since April 2022. If you're a sole trader or landlord, check your qualifying income against the £50,000 (April 2026), £30,000 (April 2027) and £20,000 (April 2028) thresholds. If you're close to one, it's worth setting up compatible software before your date arrives rather than scrambling afterwards.
What counts as "qualifying income" for MTD for Income Tax?
Your total gross income from self-employment and property, combined, before expenses — based on the figure reported on your Self Assessment return for the relevant previous tax year. It's not your profit, and it's not just one income source in isolation if you have both a business and rental income.
What software do I need for MTD?
HMRC-recognised, MTD-compatible software that can keep digital records and submit updates directly. Buzz includes FreeAgent as standard in every plan, which is fully MTD-compliant for both VAT and Income Tax.
Will I have to file more often under MTD for Income Tax?
Yes. Instead of one Self Assessment return a year, you'll submit a quarterly update of income and expenses, then an End of Period Statement and a Final Declaration to confirm the year's figures — four update points a year rather than one.
What happens if I miss an MTD deadline?
You get a penalty point. Once you reach 4 points, HMRC issues a £200 penalty, plus a further £200 for every subsequent missed deadline. Points expire after 24 months if you stay under 4 — but if you've hit the threshold, you need 12 consecutive on-time submissions to reset.
Is Making Tax Digital happening for Corporation Tax too?
Not yet, and there's no confirmed date. HMRC's 2025 Transformation Roadmap confirmed MTD for Corporation Tax isn't proceeding on its original timeline, and a separate approach is still being worked out. Limited companies should keep filing Corporation Tax as normal for now.
Does MTD mean I'll pay more tax?
No. MTD changes how and how often you report your figures to HMRC — it doesn't change the tax rules or how much you owe. Any change to your tax bill comes from your actual income and allowances, not from the switch to digital reporting.
I already use a spreadsheet — is that enough for MTD?
On its own, no — unless it's linked to HMRC-recognised bridging software that can submit directly from it. Most people find it far simpler to move to proper MTD-compatible software like FreeAgent, which keeps records and files in one place without the bridging step.
More on Making Tax Digital
The full MTD guide
Our free downloadable guide, with a readiness checklist you can work through before your deadline arrives.
Get the guide
What's changing, and when
A closer look at the rollout timeline and what it means in practice for sole traders and landlords.
Read the article
Digital accounting with Buzz
How our cloud bookkeeping and FreeAgent-based service works, day to day.
See digital accounting
