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Making Tax Digital for Income Tax

The Government’s Making Tax Digital roadmap aims to transform tax administration to make it more efficient, effective and easier for taxpayers. Under the plans, taxpayers will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.

The mandatory use of digital software for Income Tax Self-Assessment is being phased in from April 2026 onwards. If your qualifying income is over:

  • ÂŁ50,000 for the 2024 to 2025 tax year, you will need to use it from 6 April 2026
  • ÂŁ30,000 for the 2025 to 2026 tax year, you will need to use it from 6 April 2027
  • ÂŁ20,000 for the 2026 to 2027 tax year, the government has set out plans to introduce legislation to lower the qualifying income threshold

What does this mean?

Very simply:

You won’t fill out your tax return all at once. Instead, you’ll split and spread the admin throughout the year.
You will be required to send quarterly updates to HMRC from this software.
You’ll need to use recognised software, such as an app on your phone or laptop to record income and expenses.
Submit your tax return by 31 January each year.
You can find information and guides from HMRC on the dedicated site:
Making Tax Digital for Income Tax - HMRC guide

What you need to do now

1. Work out when the phased rollout applies to you

You should start to read the guidance from HMRC about qualifying income and what that means for you. Particularly when to start so you can get ready for Making Tax Digital in time. HMRC will get in touch to let you know that you must get ready for Making Tax Digital and sign up to use it. Importantly to note that HMRC won’t sign you up automatically, so it’s important to do this in time.

You can use HMRC’s tool to check when you need to use Making Tax Digital for Income Tax Find out if and when you need to use Making Tax Digital for Income Tax – GOV.UK

2. Choosing Making Tax Digital software

You’ll need to choose Making Tax Digital software that works with the new system, such as a bookkeeping or accounting app on your phone or laptop.

It’s up to you which you’d prefer. You’ll choose from a list of recognised providers. You can even use a combination of different software if that works better for you.

You will need to use software that works with Making Tax Digital for Income Tax to:

  • create, store and correct digital records of your self-employment and property income and expenses
  • send your quarterly updates to HMRC
  • submit your tax return by 31 January the following year

You can choose to use either:

  • a single software product that meets all your needs
  • more than one software product, that when used together will meet all your needs

When choosing software, you should think about your specific needs, for example, whether you want to keep using your record-keeping software.

Software that creates digital records

Some compatible software lets you create digital records of your business income and expenses.

You might do this by:

  • manually entering the records into the software (like Kinderly for example)
  • connecting the software to an online business bank account, or data capture software

The compatible software can then create digital records, using the information you provide. You should always check that the digital records are accurate.

These types of software may also allow you to send quarterly updates and submit your tax returns to HMRC (Kinderly does not have this function).

Software that connects to your records

If you decide to keep using your current spreadsheets or accounting software, you can connect them to software that works with Making Tax Digital for Income Tax.

This is known as bridging software.

There are both free and paid software options. You can find a list of compatible software here. Check whether they offer record keeping and/or bridging and ensure you choose software that meets your needs.

Practitioner Plus members, please be advised that Kinderly does not have the bridging software that connects with Making Tax Digital for Income Tax.

Guidance: Choose the right software for Making Tax Digital for Income Tax

Use HMRC’s tool to help you find software that meets your needs for Making Tax Digital for Income Tax.

 

3. Sign up

Check the guidance and Sign up for Making Tax Digital for Income Tax – GOV.UK

4. Learn more about Making Tax Digital for Income Tax

You can find guidance from HMRC, including videos, live and recorded webinars and more here HMRC videos and webinars for Making Tax Digital for Income Tax – GOV.UK

Exemptions

You can check if you can apply for an exemption from Making Tax Digital for Income Tax in the future

If you consider that you are digitally excluded, you can apply if:

  • it’s not practical for you to use software to keep digital records or submit them — this may be due to your age, disability, location or another reason
  • you are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records

You’ll need to explain how these reasons apply to your own circumstances.

HMRC will consider the information you send them and they’ll either tell you:

  • that you’re exempt (they’ll let you know what you need to do next)
  • why you’re not exempt and how you can appeal

You’ll find full guidance on exemption here Find out if you can get an exemption from Making Tax Digital for Income Tax – GOV.UK

Further support

At Coram PACEY, we are working closely with colleagues at HMRC to ensure that you know what you need to do in plenty of time for the upcoming changes. We will keep members informed of further support and resources as soon as possible.

To help us understand and support you better, if you have particular query or specific questions about Making Tax Digital for Income Tax, let us know and we will ask HMRC. Email us at policy@corampacey.org.uk and use the subject line MTD.

Coram PACEY resources

Coram PACEY webinar – Get ready for Making Tax Digital for Income Tax with HMRC

Tax returns are changing – with a new way to record and report your income and expenses. This is called Making Tax Digital (MTD) for Income Tax.

You’ll need to use recognised software to keep records of your income and expenses. HMRC won’t sign you up automatically, so it’s important to do this in time.

The first phase of the Making Tax Digital for Income Tax is fast approaching. If you have a turnover more than £50,000 then from April 2026, you’ll need to use MTD.

If your turnover is over ÂŁ30,000 then you will need to use it from April 2027 and if your turnover is over ÂŁ20,000 then it will be April 2028.

Whichever phase applies to you, now is a good time to start to learn and understand about the requirements that will affect you. We understand that this is a daunting change for many and that you’ll have many questions.

Coram PACEY hosted HMRC in a webinar where they guide you through the basics to help your plan, prepare and take action to be ready for MTD. There was also the opportunity to raise your queries, some of which were not answered to during this webinar but Coram PACEY will endeavour to get you the answers you need from HMRC.

Coram PACEY statement: Making Tax Digital

Following our webinar with HMRC on 11 December, we have worked to clarify the information shared during the webinar and, as a matter of urgency, met with HMRC this week to confirm their position about childminder expenses under Making Tax Digital (MTD) for Income Tax. We regret to confirm that, under MTD, childminders will no longer be able to claim the 10% wear-and-tear allowance… Read more 

Read our full statement

Watch the webinar recording below:

HMRC's presentation slides

Frequently asked questions

Below you will find the answers to some of the FAQs. We are working on a more comprehensive set of detailed, specific questions raised in the webinar. Please bear with us while we endeavour to get the answers you need.

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How do I choose which Making Tax Digital software to use?

Check HMRC’s guidance – it has a list of all the software options out there. 

Do this well ahead of the date you need to start keeping digital records to make sure you’re ready to use it in time. Rest assured, all software listed on GOV.UK is fit for purpose. 

Does HMRC have its own Making Tax Digital software I can use?

No – to give you more choice, HMRC is working closely with lots of different software providers.  

I use Kinderly to keep accounting and invoicing digital records, is this compatible with Making tax Digital for Income Tax?

We are excited that Kinderly are working on a solution – Kinderly Accounts – which will support users with Invoicing, Bookkeeping, Parent Payments (including tax-free childcare payments) and Making Tax Digital. We will share more as soon as we know more.  

Are there any exemptions to having to use MTD?

You can check if you can apply for an exemption from Making Tax Digital for Income Tax in the future.  

If you consider that you are digitally excluded, you can apply if: 

  • it’s not practical for you to use software to keep digital records or submit them — this may be due to your age, disability, location or another reason 
  • you are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records 

You’ll need to explain how these reasons apply to your own circumstances. 

HMRC will consider the information you send them and they’ll either tell you: 

  • that you’re exempt (they’ll let you know what you need to do next) 
  • why you’re not exempt and how you can appeal 

You’ll find full guidance on exemption here Find out if you can get an exemption from Making Tax Digital for Income Tax – GOV.UK 

I use a bookkeeper and/or an accountant, can they do MTD for me?

If you’re a sole trader, you can choose to have one or more tax agents help you to manage Making Tax Digital for Income Tax. Agents can be supporting or main, for example, a bookkeeper might complete quarterly updates. In this scenario, they are a supporting agent. An accountant might finalise the client’s overall tax position and submit their final tax return. In this scenario, they are a main agent. 

Sole traders can: 

  • only have one main agent at a time, but any number of supporting agents 
  • have a main agent without any supporting agents 
  • have supporting agents without having a main agent 
  • use more than one agent for Making Tax Digital for Income Tax only 

Main agents 

Main agents can fully manage a client’s Making Tax Digital for Income Tax. They can do everything a supporting agent can and almost everything their client can. The only things a main agent cannot do are: 

  • set up a Direct Debit for the client 
  • change how a client wants to be contacted by HMRC 

Supporting agents 

Supporting agents have limited access to Making Tax Digital for Income Tax services. They can only see a client’s business and property income details. They can do fewer tasks than main agents. 

For example, supporting agents cannot: 

  • set up a Direct Debit for the client 
  • change how a client wants to be contacted by HMRC 
  • view all sources of a client’s income for Self Assessment 
  • finalise a client’s overall tax position  
  • submit a client’s tax return  
  • view a client’s tax calculation 

Click here to Compare how main and supporting agents can help 

Agents instructed to act on your behalf will need to use will need to use commercial software that works with Making Tax Digital for Income Tax to: 

  • create, store and correct digital records of your self-employment and property income and expenses 
  • submit your tax return by 31 January the following year 

Before signing up, you and your agent should decide how they will meet these requirements and choose the software that best meets your needs.

Is there any training available?

You can learn more from HMRC videos and webinars for Making Tax Digital for Income Tax – GOV.UK 

Where can I build my digital skills to get ready?

The National Careers Service has a guide on free training that’s out there, including courses that cover digital record keeping. 

You can take an Essential digital skills for work course and learn how to apply digital skills to every day work tasks, including:

  • being confident in video calls, online chat and meetings
  • word processing
  • using spreadsheets
  • emails and file management
  • staying safe online

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