Making Tax Digital for Income Tax
Updated September 2026
A Major Change for Sole Traders and Landlords
Making Tax Digital for Income Tax (MTD) is changing the way self-employed individuals and landlords keep their accounting records and report information to HM Revenue & Customs (HMRC).
Instead of providing information only as part of the annual Self Assessment process, people within MTD must keep digital records and send quarterly updates during the tax year.
Who Is Affected?
MTD applies to individuals registered for Self Assessment who receive qualifying income from:
Self-employment, and/or
Property rental
The threshold is based on your combined gross income from these sources, before deducting expenses.
Employment income, dividends, pensions and savings interest are not included when determining whether you exceed the MTD income threshold.
When Does MTD Start?
MTD is being introduced gradually:
From 6 April 2026
Gross qualifying income over £50,000.
From 6 April 2027
Gross qualifying income over £30,000.
From 6 April 2028
The threshold is expected to reduce to £20,000.
What Changes Under MTD?
If MTD applies to you, you will need to:
✔ Keep digital records of your business income and expenses
✔ Maintain those records using compatible software
✔ Submit quarterly updates to HMRC
✔ Complete the required year-end tax reporting
MTD does not mean that Income Tax becomes payable every three months. The quarterly updates provide HMRC with information about your income and expenses during the year.
Our MTD Self-Employment Tool
We have developed an MTD Self-Employment Tool to make digital record keeping and preparation of quarterly information simpler for sole traders.
You can record your business income and expenses throughout the quarter and retain the information as part of your digital accounting records.
Expense Allowability Check
One of the main features of the tool is assistance with determining whether a business expense is allowable for Income Tax purposes.
For straightforward regular business expenses, recording is kept simple.
For non-regular expenses, the tool checks the description against its HMRC-based expense rules and recognition database. Where necessary, it asks a small number of relevant questions about the expense.
Based on the information provided, the tool can indicate that an expense is:
ALLOWABLE – normally deductible for tax purposes
NOT ALLOWABLE – normally not deductible for tax purposes
CALCULATED – the allowable amount requires a specific calculation
NEEDS REVIEW – the circumstances require further consideration or advice from your accountant
Where an expense has both business and private use, the tool can also help identify the business proportion to be included in your records.
The purpose is to resolve straightforward expense questions directly wherever possible, rather than requiring you to research HMRC rules yourself.
Preparing Your Quarterly Update
At the end of the quarter, the tool summarises the transactions you have recorded and provides a breakdown of the income and allowable expenses required for MTD reporting.
The information can be exported and used to help prepare and complete your MTD quarterly update.
This means the same records used during the quarter can form the basis of the quarterly information provided to your accountant, reducing the need to reconstruct your income and expenses at the end of each reporting period.
Important
The tool is designed to assist with digital record keeping, expense treatment and preparation of MTD information.
Where the correct tax treatment depends on circumstances that cannot reliably be determined from the information entered, the tool will identify the item as NEEDS REVIEW rather than making an uncertain decision.
Submitting Your Quarterly Records
Once you have completed your records for the quarter, select "Prepare records for my accountant / IRIS" in the MTD Self-Employment Tool.
Download the Export IRIS Breakdown CSV file and send it to us. This file contains the quarterly income and expense information required for us to prepare and submit your MTD quarterly update.
Please make sure that all income and expenses for the relevant quarter have been entered before creating the final export.
How We Can Help
We can help you:
Determine whether and when MTD applies to you
Prepare for digital record keeping
Review expenses where the tax treatment requires professional judgement
Prepare and manage your quarterly MTD submissions
Complete your annual Self Assessment obligations
Not sure whether MTD applies to you or how to prepare? Contact us for guidance.