Making Tax Digital Software

HMRC is introducing Making Tax Digital to digitise the UK tax system so that it is more accurate, efficient, and durable. This will help businesses reduce time spent on tax admin, and will create a modern system that's no longer reliant on paper.

Read more about the introduction of MTD.

MTD for Income Tax applies differently depending on your circumstances. If you're a self-employed sole trader with qualifying income above the threshold, you'll need to keep digital records and submit quarterly updates to HMRC. Landlords with property income above the threshold face the same requirement.

If you're an accountant or bookkeeper managing clients who fall into either group, you'll need an Agent Services Account and MTD-compatible software to submit updates on their behalf. Find out exactly what applies to you as a sole trader, landlord, or accountant.

Depending on your role, MTD for Income Tax changes how you record and report income to HMRC. Sole traders and landlords will need to keep digital records and send quarterly updates instead of a single annual return, giving a clearer, more regular view of tax owed throughout the year. Accountants will need to manage this process on behalf of clients using agent credentials and compatible software. See how it applies specifically if you're a sole trader, landlord, or accountant.

From April 2026, MTD for Income Tax applies to sole traders and landlords with qualifying income over £50,000. The threshold reduces to £30,000 from April 2027, and to over £20,000 from April 2028. 

HMRC has confirmed a points-based penalty system for MTD non-compliance. Although penalties aren't currently being applied, they're expected to come into effect from next year. When they do, missing quarterly submission deadlines will accumulate penalty points, with a £200 fine applied once the threshold is reached. Using compliant software like Sage Sole Trader helps you stay compliant and avoid penalties. For the latest guidance check the HMRC website.

Getting yourself set up with MTD software will help you comply with MTD rules and avoid costly penalties.

With the right HMRC-approved accounting software in place, you'll also be able to streamline your financial processes and digitise your accounts, saving your business valuable time and money.

MTD-compliant software from Sage is easy to set up and use. Once it's in place, you can:

• Generate professional sales invoices from wherever you are.
• Create records from sales invoices, bank feeds, receipt scans, or manual uploads.
• Calculate and manage your income and expenses.
• Easily create self-employed income tax summaries.
• Create copy-and-paste totals to complete your Income Tax Self Assessment return.
• Submit quarterly tax returns in just a few clicks.
• Use the Sage app on your phone or tablet and work on the go.
• Reduce the amount of paperwork you have to deal with.
• Access real-time data to better understand your business performance.
• Keep track of funds and view who owes you money.
• Securely and easily manage your bookkeeping in one place.
• Get more time back to focus on your business.

Making Tax Digital compatible software will make it simple for you to stay compliant, while keeping on top of your finances.

The Making Tax Digital (MTD) for Income Tax deadlines are:

• From 6 April 2026: Self-employed individuals and landlords with qualifying income over £50,000
• From 6 April 2027: Qualifying income over £30,000
• From 6 April 2028: Qualifying income over £20,000

If you're required to follow Making Tax Digital, you'll need to keep digital records and submit quarterly updates to HMRC. The quarterly reporting deadlines are:

• Q1 (6 April to 5 July): Submit by 7 August
• Q2 (6 July to 5 October): Submit by 7 November
• Q3 (6 October to 5 January): Submit by 7 February
• Q4 (6 January to 5 April): Submit by 7 May (following the end of the tax year)

If you're affected from April 2026, your first quarterly update will be due by 7 August 2026. Preparing now with Making Tax Digital-compatible software like Sage Sole Trader can help you stay compliant, meet every deadline, and avoid last-minute stress.

Yes. Sage is HMRC-recognised Making Tax Digital software. Our products are fully compatible with MTD for VAT and are being developed for MTD for Income Tax (ITSA).

Making Tax Digital (MTD) quarterly submissions are summaries of your business income and expenses, sent to HMRC every three months through your MTD-compatible software.

Your software automatically totals your digital records across each income and expense category. Once submitted, you'll see an estimated tax bill for your self-employment and property income, either in your software or your HMRC online services account.

You'll need to submit a quarterly update for each income source you have, including self-employment and property income. These updates do not replace annual tax returns or change payment deadlines.