Making Tax Digital Bookkeeping Requirements: 2026/27 Guide

Making Tax Digital (MTD) requires businesses within scope to keep specified records digitally and submit information to HMRC using compatible software. From 6 April 2026, MTD for Income Tax became mandatory for qualifying sole traders and landlords whose 2024/25 qualifying income exceeded £50,000.

The rollout expands to qualifying income over £30,000 from April 2027 and over £20,000 from April 2028.

Who must use MTD for Income Tax?

HMRC says all of the following must apply:

• you are a sole trader or landlord registered for Self Assessment;
• you receive self-employment or property income; and
• your combined qualifying income exceeds the relevant threshold.

Qualifying income is broadly gross self-employment and property income before expenses, rather than taxable profit. Where a person has both sources, they are combined. Partnerships are not yet brought into MTD for Income Tax under a confirmed date.

What digital records must be kept?

For each self-employment or property business, compatible software must create and maintain digital records of business income and expenses. Records should normally include:

• the date, amount and category of each transaction;
• sales and other business income;
• purchases and allowable expenses;
• adjustments required for tax; and
• separate records for each business or property-income source.

The transaction should be entered into the digital record by the applicable quarterly-update deadline. Retain the underlying invoice, receipt or other evidence under the ordinary record-keeping rules.

Can spreadsheets be used?

A spreadsheet can form part of an MTD system if it preserves the required digital records and connects to HMRC through compatible bridging software. Copying figures manually between programs can break the required digital links.

A spreadsheet alone does not submit MTD updates unless the relevant product provides a compatible connection. See our guide to using spreadsheets for bookkeeping.

Quarterly updates

MTD users send quarterly summaries of income and expenses for each qualifying source. The updates are cumulative, meaning each submission covers the period from the start of the tax year to the end of that quarter.

Quarterly updates are not separate tax returns and do not normally require year-end tax adjustments. They provide HMRC with an in-year summary based on the digital records.

Year-end tax return

After the fourth quarterly update, the taxpayer uses compatible software to make accounting and tax adjustments, add other personal income and submit the final tax return. MTD changes the record and submission process; it does not create four separate tax bills.

Self Assessment payment deadlines and payments on account continue to apply unless HMRC announces a separate change.

What software is required?

The product or combination of products must be compatible with HMRC’s MTD for Income Tax service. It should support the tasks the user needs, such as:

• creating and retaining digital records;
• authorising the connection with HMRC;
• sending quarterly updates;
• making year-end adjustments;
• submitting the tax return; and
• handling multiple businesses or property sources.

HMRC publishes a software finder. Check features carefully: some products support only part of the process or require bridging software.

Digital links

Where more than one software product is used, data must generally move electronically between them. Examples of digital links can include formulas, linked cells, API transfers, imports and exports of structured data, or automated integrations.

Manually retyping totals or copying and pasting values between separate systems may not meet the digital-link requirement. Document how information flows from source records to the submission.

Exemptions

A person may apply for exemption where it is not reasonable or practical to use digital tools, including because of age, disability, remoteness, religious beliefs or another form of digital exclusion. Exemption is not automatic merely because someone prefers paper records or finds software inconvenient.

An exempt taxpayer continues reporting through Self Assessment.

Penalties and compliance

MTD obligations sit within HMRC’s points-based penalty regimes for late submissions and late payment. Incorrect records or returns can also lead to inaccuracy penalties. Keep evidence of submissions and software authorisations, and correct errors promptly.

Preparation checklist

• Check qualifying income from the relevant earlier tax return.
• Confirm the mandatory start date even if HMRC has not written.
• Choose compatible software or appoint an agent.
• Separate each business and property-income source.
• Import opening information and test digital links.
• Set quarterly-update reminders.
• Retain invoices and receipts.
• Plan the year-end adjustment and final return.

Frequently asked questions

Is MTD based on profit or turnover?

The Income Tax threshold is based on qualifying gross income from self-employment and property, before expenses.

Do limited companies use MTD for Income Tax?

No. MTD for Income Tax applies to qualifying individuals with self-employment or property income. Companies have separate Corporation Tax and accounting obligations.

Is software required if HMRC did not send a letter?

Yes, if the statutory conditions are met. HMRC explicitly says the taxpayer remains responsible for checking.

Official sources

See HMRC’s MTD eligibility and start-date guidance, last updated 26 March 2026, and Use Making Tax Digital for Income Tax.