From April 2026, the UK tax system changes. Making Tax Digital (MTD) for Income Tax becomes mandatory for self-employed individuals and landlords earning over £50,000.  If you’re affected, preparation starts now. This guide explains what MTD is, who must comply, how to register, and what penalties apply for missed deadlines. We’ll also show you how Reflex Accounting simplifies the transition so you stay compliant without the stress.

What is Making Tax Digital (MTD) in UK

Making Tax Digital (MTD) is a government programme that changes how taxes are recorded and submitted in the UK. It requires individuals and businesses to keep their financial records digitally and file tax returns online through software approved by HMRC.

The purpose is to make tax management simpler and more reliable. By using digital systems, errors caused by manual entries are reduced, and information stays more up to date. Businesses can view their figures clearly, track their position through the year, and avoid last-minute surprises when filing taxes.

MTD is also part of HMRC’s wider effort to close the “tax gap” by improving accuracy and compliance. It continues to expand, and digital tax submission is now becoming the standard for all types of tax reporting in the UK.

For most businesses, this shift means adjusting how records are kept and shared, but it also creates an easier, more transparent way to stay on top of tax obligations.

Who Needs to Comply with MTD for Income Tax

Starting from April 2026, Making Tax Digital for Income Tax will apply to certain self-employed individuals and landlords based on their annual income. Instead of one annual return, you’ll submit four quarterly updates and one final declaration at year-end, reconciling the updates and calculating total tax.

In total, that’s five submissions per tax year.

• From 6 April 2026: Self-employed individuals and landlords with gross income above £50,000 (based on 2024/25 tax year)  
• From 6 April 2027: Self-employed individuals and landlords with gross income between £30,000–£50,000 (based on 2025/26 tax year)  
• From 6 April 2028 (planned): Individuals with income above £20,000, pending government consultation

How to Register for Making Tax Digital (MTD) in 2025

Registering for MTD for VAT

Businesses that are already registered for VAT no longer need to sign up for Making Tax Digital manually. HMRC now enrols all VAT-registered businesses automatically, unless an exemption applies.

If your business has recently registered for VAT, it will be included in MTD from the start. The key step is to ensure that your accounting software is compatible with MTD and correctly linked to your HMRC account.

Registering for MTD for  Corporation Tax

HMRC has paused plans to roll out MTD for Corporation Tax. While no start date has been set, it’s reviewing ways to modernise corporation tax administration. Businesses should still keep digital records and use compatible software to stay ready for any future changes.

Registering for MTD for Income Tax

Although Making Tax Digital for Income Tax won’t become mandatory until 2026, you can choose to join the system early. Some businesses and landlords are already testing the process through HMRC’s pilot scheme, which helps them adjust before full rollout.

Once MTD for Income Tax becomes mandatory, you’ll no longer submit a single annual Self Assessment return. Instead, you’ll submit five times a year: four quarterly submissions plus one final declaration at year-end, which reconciles the quarterly updates and calculates your total tax liability. These submissions give HMRC an ongoing view of your income and expenses throughout the tax year.

Before signing up, check that you meet the basic requirements. You’ll need to be a UK resident with current HMRC details, have a National Insurance number, and have already filed at least one Self Assessment tax return. Your tax affairs should be up to date, and your accounting year should align with the UK tax year, running from 6 April to 5 April.

How to prepare for Making Tax Digital (MTD) in the UK

Preparation matters more than the registration itself. Set up MTD-compatible accounting software first and gather your key details:

1. National Insurance number
2. The date your business started or when property income began
3. Your accounting method (cash or accrual basis)
4. The tax year you plan to begin under MTD
5. For sole traders: your business name, address, and business activity

When everything is ready, head to the Government Gateway and register using your Self Assessment user ID and password. Even after you’ve joined, you’ll still need to file a traditional Self Assessment tax return for the tax year before your first MTD submission.

Exemptions from Making Tax Digital (MTD)

Some taxpayers can be exempt from Making Tax Digital if they’re genuinely unable to use digital tools. HMRC grants this to those who are digitally excluded due to religious beliefs, age, disability, or remote location.

Preference for paper returns, limited records, or software costs don’t qualify for exemption. Applications can be made to HMRC by post, phone, or through an authorised agent, ideally before your MTD start date.

Automatic exemptions apply in specific cases, such as trustees, representatives of deceased individuals, or Lloyd’s members handling underwriting business.

Individuals with income below £20,000 may be exempt, pending government consultation.

Penalties to Avoid for Missing Deadlines Under Making Tax Digital (MTD)

HMRC uses a points-based penalty system for late submissions under Making Tax Digital. Each missed deadline adds one penalty point. Once you reach the limit, you’ll face a fixed fine of £200.

The threshold depends on how often you file:

• Monthly submissions: penalty after 5 points
• Quarterly submissions: penalty after 4 points
• Annual submissions: penalty after 2 points

Points reset to zero once you’ve met filing deadlines consistently for a set period.

For late payments, penalties apply as follows:

• If your tax is overdue by 16–30 days, a 3% charge applies.
• If still unpaid after 31 days, another 3% is added, plus a daily penalty at an annual rate of 10% until full payment is made.

Businesses that fail to use MTD-compatible software to submit VAT returns may be fined up to £400 per return.
You’re also required to keep all VAT records digitally. Failure to do so can lead to additional daily penalties between £5 and £15 until compliance is restored.

Each tax type (VAT, Income Tax) is tracked separately, so missing deadlines for both can result in multiple sets of penalties.

Making Tax Digital – How Reflex Accounting Makes It Simple

At Reflex Accounting, we help you meet HMRC’s digital requirements and  use them to your advantage. Our team ensures your transition to Making Tax Digital (MTD) is effortless, compliant, and adds value to your business.

Here’s what we do:

• Review your setup to confirm if MTD applies and what steps are needed
• Recommend and install the most effective MTD-compatible software
• Handle quarterly submissions and digital record maintenance for you
• Provide year-round tax advice and support to keep you on track

With MTD for Income Tax rolling out from April 2026, sole traders, landlords, and self-employed professionals whose income exceeded £50,000 in the 2024/25 tax year will need to maintain digital records and submit updates to HMRC throughout the year.

Reflex Accounting helps you stay ready and make sure your tax process is efficient, accurate, and stress-free.

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