Making Tax Digital (MTD) requires businesses within its scope to keep digital records and report through compatible software. VAT and Income Tax have different requirements. Registering for one does not establish that you meet the rules for the other.
MTD for VAT
MTD for VAT generally covers VAT-registered businesses, including those below the VAT registration threshold. There are exceptions: check HMRC’s VAT exemption guidance if digital reporting is not reasonably practical or another exemption may apply.
The normal workflow is to maintain the required VAT records digitally and submit the VAT return through compatible software. Where records pass between software products, the required digital links must be maintained. A spreadsheet can form part of that workflow; manually retyping totals between systems is not a digital link.
Use the MTD for VAT checklist to review the workflow. The detailed record-keeping rules are in VAT Notice 700/22.
When does MTD for Income Tax apply?
The rollout applies to sole traders and landlords whose qualifying income exceeds the relevant threshold, subject to exemptions.
| Qualifying income in the reference tax year | Required start date |
|---|---|
| Over £50,000 in 2024–25 | 6 April 2026 |
| Over £30,000 in 2025–26 | 6 April 2027 |
| Over £20,000 in 2026–27 | 6 April 2028 |
These dates are set out in HMRC’s scope and start-date guidance. The partnership rollout timetable has not yet been set.
Qualifying income is broadly the combined gross income before expenses from self-employment and property, not business profit or all personal income. Partnership profit shares do not count towards that threshold. Check how HMRC calculates qualifying income and the exemption rules for your circumstances.
Quarterly updates do not replace the annual tax return
Keep digital records and send updates for each relevant business or property income source. Updates are cumulative from the start of the tax year, rather than isolated three-month returns.
| Standard update period | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May in the following tax year |
Calendar update periods are also available. Follow HMRC’s quarterly update guidance when configuring the software.
After year end, make the necessary adjustments, include other taxable income and gains, and submit your annual tax return through compatible software by 31 January following the tax year. The year before you join MTD, for example 2025–26 for those who started on 6 April 2026, is still filed through the usual Self Assessment process. See HMRC’s annual return instructions.
Penalties and the first year
For the 2026–27 tax year, HMRC does not issue penalty points for late quarterly updates. This does not remove the record-keeping or update obligations, and it does not waive penalties for late annual returns or tax payments. Later mandatory quarterly updates fall within the points-based regime. Check the Income Tax penalty rules rather than applying VAT penalty tables to every tax.
What about Corporation Tax?
HMRC’s Transformation Roadmap states that it does not intend to introduce MTD for Corporation Tax. Do not plan around the superseded suggestion of a rollout from 2026. Companies still have their existing Corporation Tax obligations.
Put the reporting workflow in place
Check the specific product and functions in HMRC’s Income Tax software finder. An accounting system being cloud-based, or supporting MTD for VAT, does not by itself establish Income Tax compatibility.
Our MTD preparation guide explains how to organise records, responsibilities and checks before the next submission.