Preparing for Making Tax Digital means establishing a reliable reporting process, not just buying software. Start with the tax that applies to you, the relevant start date and the tasks that remain your responsibility.
1. Confirm which requirements apply
MTD for VAT generally applies to VAT-registered businesses, subject to exemptions. MTD for Income Tax has a separate phased rollout for sole traders and landlords. The first mandatory group joined on 6 April 2026, with further groups joining from 6 April 2027 and 6 April 2028 as the income threshold falls.
Use the MTD requirements and timetable alongside HMRC’s eligibility guidance. Do not assume that a partnership is already subject to the same rollout, or that MTD for VAT registration also signs you up for Income Tax.
If you should already be using MTD for Income Tax, check the sign-up process and outstanding records with your accountant now. Waiting for the next tax year does not resolve an existing obligation.
2. Check the actual software functions
Use HMRC’s compatible software finder before committing to a product. Ask the provider to demonstrate the functions you need rather than relying on a general claim that a product is MTD-ready.
| Check | What to establish |
|---|---|
| Relevant tax | Does the product support VAT, Income Tax, or both? |
| Income sources | Can it handle your particular self-employment and property records? |
| Reporting | Which product sends quarterly updates and completes the annual return? |
| Accountant access | Who can review, correct and submit information? |
| Data transfer | How will existing records move into the new workflow? |
Spreadsheets can remain part of a compatible workflow when supported by appropriate software and digital links. A bank feed or invoice scanner alone is not proof that the whole reporting process meets the requirements.
3. Organise the records before reporting
Choose a routine that leaves enough time to resolve missing information. For example, reconcile the bank regularly, review unclassified transactions and keep a list of questions for the accountant. This is a working process to agree for your business, not an extra statutory reporting frequency.
- Separate business transactions from personal spending.
- Match invoices, receipts and payments so that entries can be explained.
- Agree how corrections will be recorded and checked.
- Keep access to supporting documents when changing systems.
- Confirm which income source each record belongs to.
HMRC explains the required records in its Income Tax digital-record guidance. Our cloud accounting guide covers the wider bookkeeping workflow.
4. Plan for updates and the annual return
Income Tax quarterly update deadlines are 7 August, 7 November, 7 February and 7 May. Updates build on the tax year’s cumulative records. They are not four replacements for the annual tax return. See HMRC’s update instructions.
| Stage | Agree an owner and a check |
|---|---|
| Before an update | Resolve missing records and review the cumulative totals |
| At submission | Confirm the correct income source and retain confirmation |
| After year end | Review adjustments and other taxable income or gains |
| Annual return | Check the final figures and submit by the applicable January deadline |
In the year you join MTD, the return for the previous tax year still follows the usual Self Assessment process. The return for your first MTD tax year is submitted through MTD-compatible software by the following 31 January. HMRC’s annual return guidance explains this distinction.
5. Check exceptions without assuming automatic relief
HMRC did not issue penalty points for late quarterly updates in the first MTD year, 2026–27, but updates were still required. Check the guidance for the year you are in. Annual return and payment deadlines remain important. Review the Income Tax penalty guidance if a deadline has been missed.
If digital reporting is not reasonably practical, investigate Income Tax exemptions rather than simply stopping submissions.
A note for limited companies
Do not buy software on the assumption that MTD for Corporation Tax is about to start. HMRC’s Transformation Roadmap says it does not intend to introduce that programme. A company’s VAT and other existing filing obligations must still be assessed separately.
Before your next submission, be able to answer three questions: are the records complete, who has checked them, and who is responsible for submitting? Those answers matter as much as the software choice.