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.

The best Making Tax Digital (MTD) software is secure and HMRC-recognised. It should keep digital records automatically, and submit Income Tax updates directly to HMRC. 

Fully compatible MTD software will help you record transactions digitally and calculate totals automatically. Sage Sole Trader and Sage Accounting are both MTD-compatible solution designed for UK sole traders, landlords, and non-VAT-registered businesses, helping you stay compliant while managing your finances in one place.

The key benefits of investing in a compatible MTD software are:

• Easily complying with MTD rules and avoiding costly penalties.
  
• Streamlining your financial processes, saving time and money.
  
• Digitising your accounts and managing them from one place.

Sage Sole Trader, our free HMRC-recognised, compatible software will let you:

• Submit quarterly tax returns in just a few clicks.
  
• Calculate and manage your records, income, and expenses.
  
• Copy and paste totals to complete your Income Tax Self Assessment return easily.
  
• Use the Sage app on your phone or tablet.
  
• Stay on top of finances and keep track of funds and money owed.
  
• Securely manage your bookkeeping in one place.

For VAT-registered sole traders and small businesses who are already keeping digital records for MTD, we also provide secure, HMRC-recognised software; Sage Accounting.

Making Tax Digital (MTD) quarterly submissions are summaries of your business income and expenses from each source. These will be provided to HMRC each quarter (every 3 months) through your MTD-compatible software to help give estimates for you end-of-year tax bill.

These updates do not replace annual tax returns or change payment deadlines but allow you to get a more accurate estimate on what your tax return will be.

The standard update periods for each quarter, alongside final due dates are;

• Q1: 6 April to 5 July (Submission due date: 7 August)
• Q2: 6 July to 5 October (Submission due date: 7 November)
• Q3: 6 October to 5 January (Submission due date: 7 February)
• Q4: 6 January to 5 April (Submission due date: 7 May during the following tax year)

You’ll have one month after each period ends to submit your quarterly update – these fall on day 7 of that month, after the quarter’s ends.

You can do this within your accounting software, which will automatically provide totals for the year so far. You’ll see an estimated tax bill either in your software or HMRC online services account.

You can correct earlier quarters in later submissions.

Get more information on HMRC quarterly submissions

Note: The dates your update period covers depend on if you use standard or calendar update periods, but the deadline to send your update is the same.