What is Making Tax Digital for Income Tax (MTD ITSA)?

Making Tax Digital for Income Tax is HMRC’s programme to modernise how sole traders and landlords report their income. Instead of filing a single Self Assessment tax return at the end of the year, you keep digital records and send summary updates to HMRC each quarter using compatible software.

The key thing to understand: MTD does not change how much tax you owe. It changes how and when you report your income and expenses to HMRC.

The three pillars of MTD

Making Tax Digital is built on three requirements:

1. Digital records

You must keep records of your business income and expenses digitally. This does not mean you need special accounting software - a spreadsheet works fine, as long as the data can be sent to HMRC through compatible software without being manually retyped.

2. Quarterly updates

Four times a year, you send HMRC a summary of your income and expenses for that quarter. These are not tax returns - they are progress updates that give both you and HMRC a clearer picture of your tax position throughout the year. If you make a mistake, you can correct it in the next update.

See Quarterly Update Deadlines for the specific dates.

3. Final Declaration

At the end of the tax year, you submit a Final Declaration. This replaces the annual Self Assessment tax return. It covers all your income sources (not just self-employment and property) and confirms your tax position for the year. The deadline is 31 January following the end of the tax year.

Who does MTD apply to?

MTD for Income Tax applies to sole traders and landlords with qualifying income above certain thresholds. The programme is being phased in from April 2026.

For full details on thresholds and who is in scope, see Who Needs to Comply with MTD ITSA.

What is bridging software?

HMRC requires you to send your quarterly updates and Final Declaration through “compatible software”. One type of compatible software is bridging software - a digital tool that takes information from your existing records (such as a spreadsheet) and submits it to HMRC in the correct format.

Aligned is bridging software. If you keep your records in a spreadsheet, you upload that spreadsheet to Aligned, and Aligned handles the submission to HMRC. Your data flows digitally from your spreadsheet to HMRC without manual re-keying - which is what HMRC means by “digitally linked”.

You do not need to change how you keep your records. If spreadsheets work for you, keep using them.

If you are an accountant

MTD affects your clients who are sole traders or landlords with qualifying income above the threshold. You will need to:

Identify which clients are caught by the mandate (and when)
Help them set up digital record-keeping if they have not already
Submit quarterly updates on their behalf (or ensure they do it themselves)
Submit the Final Declaration at year-end

If you already act as your clients’ agent for Self Assessment, your existing authorisations carry over to MTD in most cases. See Agent Authorisation Explained for details.

If you are a landlord or sole trader

MTD means you will need to:

Keep your income and expense records digitally (a spreadsheet counts)
Send quarterly summaries to HMRC using compatible software
Submit a Final Declaration by 31 January after each tax year

If you use an accountant, they can handle the submissions for you. If you file for yourself, you will use bridging software like Aligned to send your data to HMRC.

FAQ

Does MTD change how much tax I pay?

No. MTD changes how you report your income and expenses to HMRC, not what you owe. Your tax liability is calculated the same way as before.

Do I still need to file a Self Assessment tax return?

The Final Declaration replaces the annual Self Assessment tax return for income sources covered by MTD. You submit it through your MTD-compatible software instead of through the Self Assessment system.

Can I still use spreadsheets?

Yes. HMRC explicitly supports the use of bridging software, which means you can continue keeping records in spreadsheets. The bridging software (like Aligned) reads your spreadsheet and sends the data to HMRC digitally.

When does MTD start?

The first group of taxpayers (those with qualifying income over 50,000) must comply from 6 April 2026. See Who Needs to Comply for the full timetable.