Do I need MTD software?

Yes, you must use HMRC-compatible software to maintain records and submit returns under MTD.

What are quarterly updates?

Under MTD ITSA, you submit income and expenses every quarter instead of annually.

Is MTD mandatory for me?

For VAT: yes if VAT registered. For ITSA: from April 2026 if income £50k+, April 2027 if £30k+.

Can I use spreadsheets?

Yes, but you need bridging software to connect to HMRC. Full software is usually easier.

What is the penalty for non-compliance?

Points-based system leading to fixed penalties. Reasonable excuse provisions apply.

General2026/27

What is Making Tax Digital? UK Definition 2026/27

Written by Waqas Sagar ACA, FCCA, FMAAT

•

Verified by ICAEW, ACCA & AAT

•Updated April 2026

Quick Answer

HMRC's programme requiring businesses to keep digital records and file online.

Definition of Making Tax Digital

Making Tax Digital (MTD) is HMRC's initiative to digitise tax administration. MTD for VAT is mandatory for all VAT-registered businesses. MTD for Income Tax Self Assessment becomes mandatory from April 2026 for self-employed and landlords with income over £50,000, extending to £30,000+ from April 2027.

Making Tax Digital — Key Facts for 2026/27

MTD for VAT	Mandatory (all VAT registered)
MTD for ITSA	April 2026 (£50k+)
Quarterly updates	Required under MTD ITSA
Software required	HMRC-compatible

How Making Tax Digital Works — Example

MTD for Income Tax timeline

1April 2026: Self-employed/landlords £50k+ income
2April 2027: Extended to £30k+ income
3Quarterly digital submissions required
4End of period statement replaces SA
5Final declaration confirms tax due

How Making Tax Digital Affects Your Tax

MTD aims to reduce errors and make tax easier to manage. It requires investment in compatible software and changes to record-keeping practices. Earlier visibility of tax due helps cash flow planning.

Official HMRC Guidance on Making Tax Digital

For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.

HMRC: Making Tax Digital

Frequently Asked Questions about Making Tax Digital

Related Tax Terms

Self Assessment

The system for reporting income and calculating tax owed to HMRC.

VAT

Value Added Tax charged at 20% on most goods and services.

Accounting Software

Digital tools for recording financial transactions and managing business accounts.

Accuracy Note

This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.