Overqualified for the admin, irreplaceable for everything else. Where AI ends and your judgement begins. Download insights →
Making Tax Digital for Income Tax: the biggest change to UK tax in decades. Here's the readable version.
MTD for Income Tax replaces one annual return with digital records, quarterly updates to HMRC and a final declaration. From April 2026, sole traders and landlords earning over £50,000 are the first in.
That reaches well past the filing itself: how records are kept through the year, how practices price and plan the work, and how often both sides talk. This page covers what MTD IT is and who it affects. The detail lives in the guides below.
What is Making Tax Digital (MTD)?
Making Tax Digital is HMRC's programme to move UK tax reporting onto software. The aim is fewer errors going in, so there is less to correct coming out.
It began with MTD for VAT in 2019. Income Tax is here now, with Corporation Tax expected to follow.
What is MTD for Income Tax (MTD IT)?
MTD for Income Tax changes how sole traders and landlords report to HMRC. Rather than filing once a year, they keep digital records and submit updates more frequently through HMRC-recognised MTD software. It arrives in waves, by income. Those earning above £50,000 join the system first, in April 2026, followed by those earning over £30,000 in April 2027, and £20,000 in April 2028.
What does MTD mean for accountants?
Practices move clients onto MTD software and support the quarterly updates. Same clients, more often.
Does MTD change tax laws?
No – it changes how data is reported, not the tax rules themselves.
How does MTD for Income Tax work?
(New requirements)
Once under MTD IT, clients must:
Keep digital records using MTD compatible software.
Submit quarterly summaries of income and expenses to HMRC
File a final declaration after the tax year ends to confirm totals, as normal
Spreadsheets are only accepted where they are connected to approved software for digital submission, and only under specific conditions.
One annual return becomes five required submissions each year. The tax itself doesn't change. The rhythm of the work does.
Are partnerships required to use MTD in 2026?
No, partnerships are not yet included.
Can clients be exempt from Making Tax Digital?
Yes – for low income, disability, or digital exclusion (with HMRC approval).
What penalties apply for non-compliance?
HMRC uses a points-based system. Repeated missed deadlines can lead to fines.
Can MTD improve client relationships?
Yes – real-time data supports proactive conversations and better outcomes
Worth knowing: for the next group in, the qualifying income is already in the past.
Eligibility for April 2027 is based on the 2025/26 tax return — and that tax year already ended.
So if a client is near the £30,000 threshold, the decision's effectively made. Only the preparation is still open.
Who needs to comply and when?
(MTD IT scope & timeline)
MTD ITSA is being phased in gradually. Here’s what the rollout looks like:
| Income threshold | Mandatory from | Who Is Included | Notes |
|---|---|---|---|
| £50,000+ | April 2026 | Sole traders & landlords | 1st wave of mandation |
| £30,000+ | April 2027 | Sole traders & landlords | 2nd wave |
| £20,000+ | Around 2028 | Sole traders & landlords | TBC (likely 2028) |
| Partnerships | TBD | Not yet included | Future phase |
Income threshold timeline
Today - Phase One live
Sole traders and landlords with taxable income above £50,000 p.a. are now required to keep digital records and submit them every quarter. HMRC has started signing up anyone in this group who hasn't registered themselves.
April 2026 - Initial Rollout
The initial phase of MTD for IT – for sole traders and landlords with taxable income above £50,000 per annum (p.a.) – will come into play in April 2026. From this point onwards, those clients will have to keep digital records and submit them every quarter.
April 2027 - Phase Two
The threshold drops to £30,000, potentially bringing more of your clients into scope. Worth planning for now, not when it lands.
April 2028 - Phase Three
From 6 April 2028, the threshold drops again to £20,000. Whether a client qualifies will be determined by their 2026/27 return.
How to prepare your practice and clients for MTD IT
The £50,000 group is already in it. The next deadline is April 2027, when the threshold drops to £30,000, and that's the one worth getting ahead of now.
1
Segment your client base. Who's above or near £30,000, on top of the clients you've already onboarded?
2
Check your pricing stretches. The tiers you built for quarterly work need to cover more clients, not a redesign.
3
Check your tech stack scales without more manual work. Volume roughly doubles at £30,000 - the question is whether that means double the admin too, or whether automation is doing enough of it that it doesn't.
4
Update engagement letters for the newly-in clients to match the quarterly scope your existing clients already agreed to.
5
Brief your team. They know the workflow - this is more client conversations, not new training.
6
Widen the pilot. You already ran this at £50,000-group scale. Now it's about rolling further out.
If your £50,000 process is holding up, the job now is checking it holds at volume. If it isn't, April 2027 is a good deadline to fix that before it fixes itself.
The new MTD IT penalty regime
Late filing under MTD for IT moves to a points-based system rather than a penalty per missed deadline. Each missed filing obligation — quarterly updates and the finalisation — earns your client a point, and at the relevant threshold that becomes a £200 financial penalty.
2 points for an annual obligation such as the tax finalisation.
4 points for a quarterly obligation.
5 points for monthly obligations.
There are three points threholds
Important to know
Taxpayers joining the beta programme will be subject to the new penalty regime (for both late filing and late payment), except they will only face potential penalties for missing annual obligations; they will not accrue points in respect of late quarterly MTD for IT submissions.
If someone subject to MTD for IT has more than one business, there will be multiple quarterly MTD for IT returns/ obligations, but only one points total. So, if someone has two businesses and files the quarterly return for each of them late, only one point is incurred for that quarter, not two.
Points expire once the taxpayer has achieved a period of compliance (24 months for annual obligations, 12 months for quarterly obligations and 6 months for monthly obligations). There is also a new system covering penalties for late payment.
MTD IT, minus the guesswork
Book a free consultation and we'll go through where your clients sit, what has to change, and what Dext can take off your desk. One client at a time, or the whole portfolio.
Download our MTD IT Guide
What you'll learn
The fundamentals of MTD IT.
What firms should be thinking about right now.
Your MTD for Income Tax checklist.
Product spotlight: Dext Solo, MTD software built for sole traders and landlords.
What you get out of going digital
More frequent reporting is more work on paper. Kept properly, it is also a far better view of the year.
For firms
Steadier workflows, instead of one annual pile-up.
Sight of the work before it arrives.
Room to move from compliance-only towards advisory.
For clients
Fewer surprises at the end of the year.
Numbers that mean something while there is still time to act on them.
A conversation that happens more than once a year.
How does MTD IT improve client services?
MTD isn’t just about avoiding penalties. It’s an opportunity to improve service delivery and internal efficiency.
When should I start preparing clients?
Now. Income from 2024/25 determines 2026 mandation.
How do I register clients?
Through your Agent Services Account on HMRC’s portal.
Why MTD for Income Tax matters for accountants
The work stops arriving all at once.
Instead of reconstructing a year in January, you have data that lands as it happens.
That means
Tax bills forecast earlier
A considerably flatter January
Client relationships built on more than a deadline
The firms that move early get the advisory conversations. The ones that wait get the deadlines.
Challenges of MTD IT, and how to get past them
None of this is frictionless.
Expect at least three sticking points:
Clients who would rather not adopt new software.
New workflows on tighter deadlines.
Uncertainty about pricing and scope.
What helps:
A clear segmentation and rollout plan before anyone is onboarded.
Onboarding materials and webinars that do the client education for you.
Offer tiered services: DIY, supported, or full-service.
Mainly, don't wait. Gaps found in a pilot are cheap. Gaps found in a deadline week are not.
Choosing MTD software for your firm
The wrong tool turns MTD IT into one continuous tax season. The right one turns it into four quiet quarters.
Worth prioritising:
HMRC-recognised.
Specialist tools that work alongside the tax software you already use — 'end to end' suites tend to create their own problems.
Something your clients will actually use, rather than tolerate.
mobile bookkeeping app alongside the main platform.
Dext Solo — built for MTD IT
Dext Solo is for sole traders and landlords who don't need full accounting software but do need digital records. Clients capture receipts, categorise expenses (including disallowables) and process bank statements. You get clean, structured data, checked before it goes anywhere near a submission.
Simple for the client. Scalable for you.
HMRC-recognised
Easy for clients, efficient for your team
Built for sole traders and landlords
Multi-client dashboard for accountants
Integrated with bank feeds and payroll
Secure, supported and sensibly priced
Start by identifying clients most likely to be impacted in 2026. Onboard them to software now, and use that time to refine your internal processes.
Handy resources
Accountants and landlords looking for extra information found the following resources helpful.
Answers to dozens of practical client and compliance questions
Learn moreMTD IT Cheat Sheet
MTD IT Pricing Guide.
MTD IT Webinars with Dext MTD experts.
Digital records & Submission
Where to start
You now know what MTD IT changes and who it affects. The rest is sequencing.
Pick a small group of clients. Test the process on them. Choose a tool that still holds up when it is the whole portfolio. And do it before the first quarterly deadline, rather than during it.
Want to get ahead of the curve?
Download our free guide: The Road to MTD 2026 – packed with templates, timelines, and rollout tips.
FAQs
Many solutions now support both. Using one platform for both workflows can simplify processes and improve efficiency.
Dext offers onboarding, training sessions, help centres, and MTD-specific guides to support your team and your clients.
Yes – Dext Solo exports clean, categorised data in formats compatible with many tax and filing tools, including CSV.
For mandated businesses, MTD for Income Tax isn't optional, and following the rules avoids the penalties that come with missing a deadline. Beyond that, keeping records digitally makes the numbers more accurate: Dext automates the repetitive admin and catches the errors before they reach your books. A regular view of your tax position also makes planning for the bill rather less of a surprise.
You’ll need to use bridging software that connects spreadsheets to HMRC, in order to submit MTD compliant returns. Though, with the increased reporting requirements, using spreadsheets for MTD for IT could prove tricky. Dext provides software that lets you upload VAT amounts, then send MTD VAT standard rate returns from Dext.
