Frequently Asked Questions on Making Tax Digital

Our team has supported a wide range of clients through the transition to Making Tax Digital for VAT and are already advising many more on its second phase – Making Tax Digital for Income Tax. 

Here, Prime associate director and tax expert Paislei Godley, answers the most common questions on Making Tax Digital, from what it is to who it impacts. 

Paislei qualified as a Chartered Tax Adviser with the Chartered Institute of Tax in 2013 and became a Fellow of the Association of Taxation Technicians in 2021.

What is Making Tax Digital?

Making Tax Digital is a digital reporting system introduced by HMRC as part of its tax administration strategy. It aims to reduce the tax gap – the difference between what should be paid and the amount that is actually paid – by bringing tax payments forward.

HMRC is digitising tax administration and management for VAT registered businesses and for income tax for individuals who are self-employed or landlords. 

Making Tax Digital for VAT was introduced in April 2022. Making it a legal requirement for all VAT registered businesses to keep a digital record of their tax payments.

Making Tax Digital for Income Tax Self Assessment will become compulsory from April 2026 for sole traders and landlords earning over £50,000.

When does Making Tax Digital start?

HMRC has been rolling out Making Tax Digital in phases since April 2022.

Making Tax Digital for VAT

Making Tax Digital for VAT is now mandatory and was introduced in the following phases:

• April 2019 – for businesses with a turnover above £85,000

• April 2022 – for all businesses regardless of turnover

Making Tax Digital for Income Tax Self Assessment (ITSA)

Making Tax Digital for ITSA – including sole traders and landlords – is due to launch in two phases:

• April 2026 – for annual incomes of over £50,000

• April 2027 – for annual incomes of over £30,000

What is the deadline for Making Tax Digital​?

Instead of submitting a Self Assessment tax return at the end of the tax year to declare income tax, individuals will have to submit quarterly returns together with an end of period statement and final declaration.

This will apply to sole traders and landlords.

The following dates are the new deadlines for submitting quarterly MTD returns from April 2026:

Why is HMRC making tax digital​?

HRMC has introduced Making Tax Digital in order to move businesses away from inefficient record keeping.

By digitising the tax system, it can review reports and payments from businesses and individuals more frequently and more easily.

HMRC will now be able to access all the data behind the numbers on a tax return to interrogate more frequently.

Who is exempt from Making Tax Digital​?

Currently, only sole traders and landlords earning under £30,000 per year are exempt from Making Tax Digital for Income Tax Self Assessment.

HMRC has not announced any plans to make MTD compulsory for those earning under the £30,000 threshold.

Do I need to register for Making Tax Digital?

Yes, you must register for Making Tax Digital ahead of the 6th April 2026 deadline and have compatible software in place.

HMRC will publicise the deadline and thresholds for Making Tax Digital, but it is the tax payer’s responsibility to ensure that they are registered and prepared for digitisation.

Contact our tax team for help and support with registering for Making Tax Digital for Income Tax or sign up via HMRC.

Do I need software for Making Tax Digital?

In order to submit your quarterly Making Tax Digital returns, you will need to have access to compatible software.

Accounting software specialists like Xero have worked alongside HMRC to develop software that is suitable for businesses and individuals to submit their quarterly returns.

Review HMRC’s full list of compatible software for MTD for VAT and MTD for ITSA. For advice and support on finding the right software solution, speak to our team.

How does Making Tax Digital work?

You must be registered and have compatible software in order to submit your returns via Making Tax Digital.

VAT and Income Tax Self Assessment returns must be submitted online every quarter.

At present Income Tax continues to become payable on 31 January and 31 July.

An end of period statement followed by a final declaration for all income sources must also be submitted.

What is the threshold for Making Tax Digital?

Making Tax Digital for VAT became mandatory for all businesses, regardless of turnover, from April 2022.

Making Tax Digital for Income Tax Self Assessment will be introduced in two phases:

• April 2026 – for annual incomes of over £50,000

• April 2027 – for annual incomes of over £30,000

Is Making Tax Digital compulsory?

Yes. If you meet one of the two thresholds for Making Tax Digital for Income Tax then you will be required to submit quarterly returns via compatible software from April 2026 or April 2027.

Making Tax Digital for VAT is already compulsory for all sole trader businesses and landlords in the UK.