MTD IT: Frequently Asked Questions

Published on: 04.02.2025

Last modified on: 12.06.2026

MTD IT: Frequently Asked Questions

Introduction

Over the past few years, tax expert Paul Aplin and our in-house specialist Paul Lodder have hosted numerous webinars on Making Tax Digital for Income Tax (MTD for IT). This FAQ brings together the most commonly asked questions from accountants and bookkeepers, providing clear and practical answers.The information in this document reflects our current understanding of HMRC's rules at the time of writing. We will update it as and when further guidance or changes are issued.

1. General Overview

What is MTD for Income Tax?

Who must comply with MTD for Income Tax by April 2026?

Does HMRC support multiple agents for MTD for Income Tax?

2. Registration and Timelines

When and how will HMRC notify agents and taxpayers about MTD for Income Tax?

When do I need to sign up a client for MTD for Income Tax?

Does a client register themselves or can their agent do it?

What if my business starts part way through a tax year—when does MTD apply?

What if I start a second business after my first business is already under MTD?

What about partnerships and limited companies?

3. Record-keeping software

Is it mandatory to use software for MTD for Income Tax?

What happens if I already have bookkeeping software for VAT?

Can I use different software for quarterly updates and the final return?

4. Quarterly updates and finalisation

Are there four separate tax returns each year?

How long after the end of a quarter do I have to submit the information?

Do I need to make quarterly tax payments?

Can quarterly updates use the cash basis, while the final return uses accruals?

How are capital allowances handled in the quarterly updates?

Can I align my quarterly updates with calendar quarters instead of tax-year quarters?

Can I submit a quarterly update early if I'm going on holiday?

What if my business ceases during the year—do I still file the final quarterly update?

How do I correct mistakes in my digital records after submitting a quarterly update?

Can l do 3-line submissions? What is the threshold?

Do quarterly updates need a balance sheet?

Will I need to change my VAT quarters to align with MTD for IT quarters?

How will Basis Period Reform (BPR) affect things?

What is included in the quarterly returns?

5. Property income

How is property income reported under MTD for Income Tax?

What if property is jointly owned?

If someone exceeds the threshold mid-year, do they start quarterly reporting immediately?

Are there any relaxations to the rules for jointly let property?

6. Multiple trades and income sources

Does MTD for Income Tax apply if a client has more than one self-employment or rental property business?

Does having two trades each below £50,000 matter if their combined turnover exceeds £50,000?

Are personal income sources (e.g., employment, dividends) included for MTD for Income Tax threshold calculations?

7. Penalties and compliance

Will there be penalties for late or missing quarterly updates?

What if a client's Self Assessment return is late, making them miss their MTD start date?

8. Voluntary registration and beta testing

Can I voluntarily sign a client up for MTD for Income Tax before they are mandated?

Do agents need permission from clients to register them for testing?

9. Exemptions

Who can be exempt from MTD for Income Tax?

If I'm non-UK domiciled or non-resident, do I have to include my foreign businesses in MTD?

What about trusts and estates?

10. Finalisation

What happens in finalisation?

11. Additional points and reminders

Threshold Based on Turnover: MTD applies if total self-employment and/or property turnover exceeds the relevant threshold.
Two-Year Look-Back: Mandation for a given year is based on the tax return from two years prior - the CY-2 rule.
Three-Year Minimum: Once mandated, a taxpayer remains in MTD for at least three years.
Other Income Sources: Employment, dividends, etc., do not affect the MTD turnover threshold.

Submission Deadlines: Quarterly updates are due one month + 7 days (if calendar quarters) after quarter-end and on the seventh of the month following the quarter end (if using tax year quarters). You can submit up to 10 days before the quarter ends if you're sure no more transactions will occur.

12. Frequently referenced legislation and guidance

Get ahead of MTD for IT with Solo

MTD for IT is right around the corner. If you’re yet to start, now is the time to do so. You can still make use of testing periods – whether that’s with HMRC or a software vendor – and refine your approach well in advance. Click below to book a call with one of our team and learn more about your options.

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Disclaimer

This document provides general information based on current guidance and legislation as at 1st March 2025. Future changes or updates by HMRC may alter the requirements.