With the clock ticking toward the April 2026 deadline, many self-employed individuals, landlords, and small business owners are trying to make sense of what Making Tax Digital for Income Tax (MTD IT) really means. This guide offers comprehensive answers to the most frequently asked questions, ensuring you’re not just ready—but confident.
Whether you’re just getting started or already exploring digital tools, these insights will help you understand your obligations and how to stay compliant.
✅ When Will HMRC Notify Me?
HMRC is phasing in communication from early 2025:
- February 2025: Agents get an initial update.
- March 2025: Agents are told which clients fall within the scope.
- April–June 2025: Letters go out to taxpayers with income over £50k, inviting them to sign up for the pilot phase (also called “beta testing”).
If your income is just under the threshold, you may still receive communications encouraging early adoption.
✅ Can I Still Use Excel or Do I Need Software?
You must use digital tools, but that doesn’t mean you have to ditch Excel. You can still maintain records in Excel if you use bridging software that sends your data to HMRC in the correct format.
Alternatively, you can use any HMRC-approved MTD-compatible accounting software like QuickBooks, FreeAgent, Xero, or Dext Solo. Manual entry on the HMRC website is not allowed under MTD.
✅ How Often Do I File Under MTD?
You won’t be submitting four tax returns. Instead, you’ll send quarterly summaries of income and expenses, followed by a single final declaration at the end of the tax year. These submissions are cumulative and designed to simplify correction of earlier mistakes.
You can choose to file using either:
- Tax year quarters: (e.g., 6 April–5 July, 6 July–5 October)
- Calendar quarters: (e.g., 1 April–30 June, 1 July–30 September)
Each update must be submitted within one month and 7 days after the quarter ends.
✅ Can I Use Different Software for Each Stage?
Yes! You’re not locked into a single tool. You can use one platform for your quarterly updates and a different one for your end-of-year final declaration, provided both are approved by HMRC.
This flexibility allows agents and taxpayers to mix solutions that work best for them, especially if one software handles real-time data while another is better suited for complex year-end adjustments.
✅ What If I Have More Than One Business or Rental Property?
Each business activity you operate requires separate quarterly updates. For example:
- Self-employed Business A: 4 updates
- Self-employed Business B: 4 updates
- UK property rental: 4 updates
- Overseas property rental: 4 updates
All updates roll into one year-end finalisation. Even if each activity earns under the threshold, MTD applies if the combined total is over £50,000 (or £30,000 from 2027).
✅ What Happens If I Make a Mistake?
Mistakes happen—and MTD accounts for that. If you spot an error in a quarterly update, simply correct it in your next submission. There’s no need to go back and amend earlier reports unless the mistake was significant.
Your records must reflect the correction, and all changes must be completed before your next quarterly update is due.
✅ Are There Penalties for Late Filing?
Yes. HMRC will apply a points-based penalty system:
- 1 penalty point per missed submission
- After 4 points, you get a £200 fine
This mirrors the MTD for VAT penalty scheme. Importantly, the penalty system only applies once you’re formally mandated, not during the voluntary pilot.
Absolutely. In fact, early adopters benefit by:
Getting used to the software and process
Avoiding penalties while learning
Having more time to prepare for finalisation
You can join the MTD pilot program today. Just ask your accountant to help you register, but remember—your consent is required before an agent can sign you up.
✅ Are There Exemptions?
You may be eligible for exemption from MTD if you:
- Cannot engage digitally due to a disability
- Live in an area with poor internet access
- Have religious objections to digital tools
Additionally, certain groups like ministers of religion, Lloyd’s underwriters, or those receiving Blind Person’s Allowance may also be exempt. Trusts and estates are currently not part of MTD for Income Tax.
You will need to apply for exemption with HMRC and provide supporting evidence.
✅ Let us handle the compliance while you focus on your business.