MTD FAQ: The 20 Most Common Questions Answered

Making Tax Digital raises a lot of questions. Here are clear, no-nonsense answers to the twenty questions we hear most often.

1. What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's programme to replace annual paper and online tax returns with digital record keeping and quarterly reporting through compatible software. It aims to reduce errors and give taxpayers a real-time view of their tax position.

2. When does MTD for Income Tax start?

MTD for Income Tax becomes mandatory from 6 April 2026 for sole traders and landlords with gross income over £50,000. The threshold drops to £30,000 from April 2027.

3. Does MTD apply to limited companies?

Not yet. MTD for Income Tax covers sole traders and landlords only. MTD for Corporation Tax (limited companies) has no confirmed start date.

4. What is the income threshold?

The threshold is £50,000 gross income from self-employment and property combined. Gross income means your total turnover before expenses, not your profit.

5. Do I need special software?

Yes. You must use HMRC-recognised MTD-compatible software to keep digital records and submit quarterly updates. Accounted is fully MTD ITSA compliant.

6. Can I still use a spreadsheet?

Only with bridging software that creates a digital link to HMRC. A spreadsheet alone is not sufficient — it cannot submit quarterly updates.

7. What do I submit each quarter?

A summary of your business income and categorised expenses for that three-month period. You do not submit individual receipts or invoices.

8. When are quarterly updates due?

Q1 (Apr–Jul): 7 August. Q2 (Jul–Oct): 7 November. Q3 (Oct–Jan): 7 February. Q4 (Jan–Apr): 7 May. Plus a final declaration by 31 January.

9. Do I still need to do a Self Assessment return?

The final declaration replaces your Self Assessment return for income covered by MTD. If you have other income not covered by MTD, you may still need to report it separately.

10. What are the penalties for late submission?

Each late submission earns a penalty point. After 4 points, each subsequent late submission triggers a £200 fine. Points reset after 24 months of on-time filing.

11. Can my accountant handle MTD for me?

Yes. Your accountant can manage your software, review your records, and submit on your behalf through their agent account. However, you still need to keep digital records throughout the year.

12. Is MTD the same as MTD for VAT?

No. MTD for VAT and MTD for Income Tax are separate programmes with different rules, deadlines, and software requirements. Being compliant with one does not make you compliant with the other.

13. What if I earn under £50,000?

You are not required to comply until the threshold drops to £30,000 in April 2027. You can voluntarily sign up from April 2026.

14. Does property income count?

Yes. Gross income from self-employment and UK property are combined to determine whether you exceed the threshold.

15. Can I use cash basis accounting?

Yes. MTD does not change your choice of accounting method. Cash basis remains the default for most sole traders.

16. How do I sign up for MTD?

Through the Government Gateway on GOV.UK. You link your compatible software to your HMRC account and authorise it to submit on your behalf.

17. What records must I keep digitally?

The date, amount, and category of every business income and expense transaction. You do not need to scan every receipt, but the transaction data must be in your software.

18. What happens after I submit a quarterly update?

HMRC uses it to calculate a running estimate of your tax liability. This estimate is informational — your actual tax is calculated after the final declaration.

19. Can I correct mistakes after submitting?

Yes. You can adjust figures in subsequent quarterly updates or in the final declaration. HMRC acknowledges that quarterly figures are provisional.

20. How do I choose the right software?

Look for HMRC compatibility, bank feeds, AI categorisation, receipt capture, and real-time tax estimates. Try a free trial before committing.

Stop dreading your Self Assessment. Accounted tracks everything throughout the year so January is just a click, not a crisis. Try it free.