This guide is designed for complete beginners with no prior knowledge for Making Tax Digital for Income Tax.

It's a three part series designed to get you up and running with MTD for Income Tax:

• Part 1: Making Tax Digital for Income Tax Explained: Deadlines, Rules, and How to Prepare (MTD IT Guide 2025)
• Part 2: How to Register for MTD Income Tax: Complete Step-by-Step Guide
• Part 3: Getting Started with AbraTax: HMRC-Recognised Software to File Your MTD Income Tax Updates

First lets start with some background. HMRC’s Making Tax Digital for Income Tax (MTD IT) marks a major shift in how millions of sole traders and landlords will file their taxes. Tax payers affected will no longer file a Self Assessment return, although the replacement MTD Final Declaration appears to be very similar.

Other key changes include:

1. Being required to keep digital records
2. Sending quarterly updates of MTD-mandated income, that derived from self-employment work and/or property rentals (non-MTD income remains to be filed once per year as part of an annual declaration)
3. File through recognised third party software such as AbraTax
4. A new penalty point system

According to HMRC, Making Tax Digital is designed to “make it easier for individuals and businesses to get their tax right and keep on top of their affairs.”
(Source: HMRC – Making Tax Digital overview)

If you’re feeling unsure where to start, don’t worry. We’ll make it simple and break it down step by step, so you can understand what Making Tax Digital for Income Tax is, who is affected, and how to get set up using AbraTax - our user-friendly, MTD-compatible software. By the end, you'll know how to register with HMRC, connect AbraTax, and start filing your quarterly updates and final return.

Side Note: Name Change from MTD ITSA to MTD IT

HMRC previously referred to their programme as MTD for Income Tax Self Assessment (ITSA). However, this changed to MTD for Income Tax (MTD IT) earlier this year. Both terms mean the same thing, and in this guide, we’ll use the most latter recent term MTD IT.

Let's get started!

1. What is Making Tax Digital for Income Tax?

MTD IT is HMRC's new modern way of handling Income Tax for self-employed people and landlords. It is designed to replace the classic Self Assessment service. Instead of waiting until January, as many of us do, to file one giant tax return, you'll keep your records digitally and send quarterly summaries (called "updates") through the year using HMRC recognised software such as AbraTax for MTD mandated income (from self employment and property income).

Example: If you run a small business or rent out a property, you must record your income digitally and send quarterly summaries using HMRC-recognised software such as AbraTax, which keep a digital link from records to submission.

The distinction between MTD income and non-MTD income is important. The former includes only income from self employment work, and property in both the UK and overseas, added together. This has been referred to as "MTD qualifying income" by HMRC, as it's the combined total that triggers requirement to join the MTD programme post 2026 - more on that later. The latter non-MTD income, includes other incomes people might also receive, for example from dividends payments, bank interest and PAYE based employment etc.

When you become part of the MTD programme, you'll still wrap up the year with a final declaration by 31st January, but the quarterly submissions for MTD-mandated income help catch issues early, improve accuracy while giving a more real time account of the likely tax liability. This final declaration is also where the non-mandated incomes mentioned above are submitted.

1.2. Why the Change?

HMRC cite the 'tax gap' defined as the difference between theoretically expected tax revenues and those actual collected being less, as a core motivation behind the MTD programme. The intention is that by requiring businesses to keep digital records linked digitally to submissions, as opposed to paper receipt and manual process, the accuracy of tax returns is increased and collected tax revenues go up thus closing this tax gap.

There are perceived benefits to businesses and industry too, in that by spreading reporting across the year, the end-of-year stressful crunch time is lessened. This regular reporting also allows for HMRC, and businesses to estimate the tax liability earlier in the year and therefore plan more effectively.

Finally, it could also be argued that by HMRC opening up their systems to communicate with independent software vendors, a marketplace is created where users can be better served. Apart from the obvious cost saving to HMRC of not having to maintain and develop a website such as the incumbent Self Assessment website (planned to be eventually switched off), it also means that a wider range of software options can be made available suiting individual needs better.

1.3. How It Works in Practice

Overall, tax payers required to be part of the Making Tax Digital programme will need to complete the following activities each year:

• Mandatory Digital Records: Track your business or rental income and expenses electronically - such as with spreadsheets. Paper records alone won't cut it anymore.
• Send 4 Quarterly Updates: After each three-month period, send a simple summary of your income and expenses so far (year-to-date) via software.
• Submit a Final Declaration: By 31 January, confirm everything by make adjustments to the MTD-mandated income (such as claiming reliefs), and declaring other non-MTD incomes (e.g. dividends and interest).

MTD for Income Tax is open for voluntary sign-ups now and rolls out mandatorily in stages based on qualifying income (self employment + property/landlord income) from 2026, expanding each year (please see table below).

Check out our IT-tagged blog posts for more information.

1.4. Who Must Join MTD Income Tax, and When?

Following the HMRC MTD Income Tax changes coming in April 2026, the rollout will happen in stages based on how much you earn. Not everyone is mandated all at once. HMRC bases it on your qualifying income, which is calculated based on the total amount you earn from self-employment and property before deducting any expenses.

If you’re self-employed and a landlord you’ll need to add up your business and rental income to see if you meet the threshold. For clarity, even if both respective income are below the threshold but the combined total is above, you are required to be part of the MTD programme.

You can read more about what counts as qualifying income on HMRC’s official guidance. In simple terms, it’s your total self-employment and property income before expenses, the amount HMRC uses to decide when you’ll need to join MTD for Income Tax.

If you’re a sole trader, landlord, or both, here’s the timeline:

These are the MTD IT thresholds: £50,000, £30,000, and £20,000.

HMRC are planning to send a letters to those in MTD scope, but it should be stressed that HMRC view it ultimately as the tax payers responsibility to check if you should be enrolled.

You can use HMRC's free eligibility tool on GOV.UK to help.

1.5. Do any exemptions apply?

There are very few exemptions, some of these include:

• Incomes of £20,000 or less
• Certain complexities relating to partnerships and trusts
• If you're digitally excluded, for example due to lack of access to reliable internet, and/or recognised difficulties with technology, HMRC offers paper alternatives

If you're below the thresholds or exempt, you can still join voluntarily, and benefit from improves efficiencies and early tax liability insights for example.

1.6. Deadlines & Quarters (Calendar vs Standard Tax Year)

Making Tax Digital adds the new requirement of quarterly reporting, but the existing January deadline stays the same for the Final Declaration, just like it's predecessor Self Assessment. The MTD IT quarterly submission deadlines are one month and seven days after each quarter ends (e.g., 7 August for April–July). If a deadline falls on a weekend or bank holiday, it's the next working day.

Depending on software features available, tax payers also have the choices of dates for their quarters, which can be either standard tax year, or calendar dates.

Standard Tax-Year Quarters (Most Common)
These align with the UK tax year (6 April to 5 April). Use this if your books end on 5 April.

Final: Submit by 31 January 2028 (including payment balance).

Calendar Quarters Option
If your accounting year ends 31 March, select this in your software at the start of the tax year. Periods shift to month-ends, but deadlines stay the same.

Please note, once calendar quarters are selected, you're unable to switch mid-year, so pick what fits your bookkeeping. However, they can be changed for the following year if needed.

(Reference: HMRC – quarterly update deadlines)

1.7. Final Declaration and Payments on Account Dates

Final Declaration: By 31st January after the tax year (e.g., 31 January 2028 for 2026–27). Review quarters, adjust (e.g., claim reliefs, capital allowances etc), confirm each income source via an End of Period Statement (MTD Income Tax), and submit your declaration.

Payments on Account: Unchanged – 50% by 31 January, 50% by 31 July (if applicable). No quarterly payments required.
(Reference:HMRC – Payments on account)

1.8. New MTD Penalties

MTD uses a new points-based system for late submissions as opposed to an immediate financial penalty, as has been the case in the past. Financial penalties apply once a threshold is reached, which varies according to submission frequency. Full details are listed on(HMRC – Penalties for late submission).

During the voluntary phase, HMRC isn’t charging quarterly late-submission penalties, but they’ll apply once MTD becomes mandatory.

Enroll for MTD Income Tax today with AbraTax

There are a number of benefits enrolling early:

• Avoid the rush when roughly 1M people are mandated next year, waiting on the phone if support is required
• Learn and be prepared before the points trigger financial penalty.
• Access to a dedicated HMRC MTD support team, and friendly AbraTax software support.

Sign up for MTD for Income Tax with HMRC and then Register for an AbraTax MTD for Income Tax account today. Once enrolled both work seamlessly, and this should be instant.

Our next blog post talks about the process of enrolling for MTD for Income Tax.

Whether you’re preparing for MTD as a landlord or getting ready as a self-employed taxpayer, AbraTax helps you record, update, and file with ease.