The way you manage your tax is about to change—dramatically. From April 2026, Making Tax Digital for Income Tax (MTD IT) will begin reshaping how sole traders, partnerships, and landlords handle financial record keeping and submissions. By April 2028, most unincorporated businesses will be required to comply, and those who don’t risk landing in hot water. MTD IT isn’t just about going digital—it’s a complete transformation in how information is recorded, reported and reviewed by HMRC.

Manual records will become a thing of the past, replaced by mandatory use of HMRC-approved software for quarterly and annual filings. To make sure businesses meet the new demands, a points-based penalty system will be introduced, ramping up the consequences for missed deadlines and errors.

To help you stay ahead, we’ve created the Special Report MTD IT – 50 Key Questions Answered—a clear, practical guide answering 50 essential questions to help you prepare. You’ll learn when the rules kick in, how they apply to multiple businesses, which data must be submitted, and what roles accountants and bookkeepers will play. You’ll also discover smart strategies to claim exemptions and steer clear of costly penalties.

Whether you're a sole trader, landlord, partnership, or part of the accounting profession, this is your chance to future-proof your approach and transition with confidence.

Table of contents Introduction MTD for Income Tax (MTD IT) - who, when and what? 1. Who is required to use MTD IT? 2. Who is automatically exempt? 3. Who can apply for an exemption? 4. Can I be excluded from MTD IT for any other reason? 5. When am I required to start using MTD IT? 6. When does MTD IT start to apply for new businesses? 7. What if I start to receive income from an additional source part way through the year? 8. Can I use MTD IT if my turnover is below the threshold? 9. Who can sign up voluntarily? 10. Who cannot sign up voluntarily? 11. Can I stop using MTD IT if my turnover falls below the threshold? 12. If all my qualifying income ceases when can I stop sending reports? 13. What counts as qualifying income? 14. Is VAT part of my qualifying turnover? 15. What other types of income are excluded? 16. Does foreign income count as qualifying? 17. What if I have two or more businesses? 18. If I make a loss from a business does that reduce my qualifying turnover? 19. What if I prepare my accounts on the accruals instead of the cash basis? Reporting to HMRC 20. What MTD IT reports are required? 21. Will I still be required to submit a self-assessment tax return? 22. What are the deadlines for MTD IT reporting? 23. Can I change the quarterly reporting dates? 24. Can I send a quarterly report before the quarter has ended? 25. If I have more than one business how many MTD IT reports must I make? 26. Does MTD IT change when tax is payable? 27. What information must I include on the quarterly reports? 28. Must I include non-MTD IT income in my reports? 29. Can I use simplified (three-line) reporting? 30. Do I need to include figures from my account’s balance sheet? 31. Are there any special reporting rules if I have income from a jointly owned property? 32. How do I correct mistakes in reports? Record keeping and compatible software 33. Does MTD IT require me to keep more information? 34. What is “end-to-end” digital record keeping? 35. Must I have a digital receipt, invoice, etc. for every transaction? 36. Must I use an accountant or bookkeeper to maintain my records? 37. What must I record in my MTD IT records? 38. How should I keep records if I have multiple businesses? 39. What is “compatible software”? 40. I already use compatible software for my VAT returns, can I use it for MTD IT? 41. Will HMRC provide free MTD software? Signing up for MTD IT 42. Will HMRC tell me if I need to register for MTD IT? 43. Can I use MTD IT before I’m mandated to? 44. How do I register (sign up)? 45. Can I start using MTD IT part way through a tax year? 46. I have a bookkeeper and an accountant - can they both use MTD IT on my behalf? Penalties 47. Will I be fined if I send an MTD IT report late? 48. How much will I be fined for late filing of MTD IT reports? 49. Can I appeal against an HMRC decision to add points to my record for late reporting? 50. How much will I be fined for paying tax late?