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What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax, commonly called MTD for Income Tax, is an HM Revenue & Customs reporting system for qualifying landlords and self-employed individuals.
Under MTD, you must normally use compatible accounting software to:
• keep digital records of income and expenses;
• submit summary updates to HMRC every three months;
• make any necessary year-end adjustments; and
• confirm your final tax position through compatible software.
MTD changes how financial information is recorded and submitted. It does not change the underlying rules used to calculate your taxable profit or the amount of tax you owe.
Who must use Making Tax Digital?
You will normally need to use MTD for Income Tax from 6 April 2026 if:
• you are registered for Self Assessment;
• you receive income from self-employment, property, or both; and
• your total qualifying gross income exceeded £50,000 in the relevant earlier tax year.
MTD is being introduced in phases.
Qualifying gross income MTD start date
More than £50,000 6 April 2026
More than £30,000 6 April 2027
More than £20,000 6 April 2028
The threshold is based on gross qualifying income before expenses, not taxable profit.
A common misunderstanding
One of the most common misunderstandings is that the MTD threshold is based on profit.
For example, a sole trader with turnover of £55,000 and allowable expenses of £25,000 may still need to use MTD, even though the resulting taxable profit is only £30,000.
Under MTD, you must normally use compatible accounting software to:
• keep digital records of income and expenses;
• submit summary updates to HMRC every three months;
• make any necessary year-end adjustments; and
• confirm your final tax position through compatible software.
MTD changes how financial information is recorded and submitted. It does not change the underlying rules used to calculate your taxable profit or the amount of tax you owe.
Who must use Making Tax Digital?
You will normally need to use MTD for Income Tax from 6 April 2026 if:
• you are registered for Self Assessment;
• you receive income from self-employment, property, or both; and
• your total qualifying gross income exceeded £50,000 in the relevant earlier tax year.
MTD is being introduced in phases.
Qualifying gross income MTD start date
More than £50,000 6 April 2026
More than £30,000 6 April 2027
More than £20,000 6 April 2028
The threshold is based on gross qualifying income before expenses, not taxable profit.
A common misunderstanding
One of the most common misunderstandings is that the MTD threshold is based on profit.
For example, a sole trader with turnover of £55,000 and allowable expenses of £25,000 may still need to use MTD, even though the resulting taxable profit is only £30,000.
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Address
33 Great George Street, Leeds, LS1 3AJ
Phone
07596355888
Email
info@FletcherGill.co.uk
What income counts towards the MTD threshold?
Qualifying income generally includes gross income from:
• sole-trader businesses;
• freelance and consultancy work;
• residential property;
• commercial property;
• short-term and holiday accommodation;
• overseas property; and
• other property businesses.
Income from different self-employment and property activities is generally combined.
Example
A Leeds landlord receives £28,000 in gross rental income and earns a further £25,000 from self-employment.
The combined qualifying income is £53,000. The individual may therefore need to use Making Tax Digital, even though neither source exceeds £50,000 on its own.
Employment income taxed through PAYE, pensions, dividends and savings interest do not normally count towards the qualifying-income threshold. They may still need to be included when the final tax position is completed.
• sole-trader businesses;
• freelance and consultancy work;
• residential property;
• commercial property;
• short-term and holiday accommodation;
• overseas property; and
• other property businesses.
Income from different self-employment and property activities is generally combined.
Example
A Leeds landlord receives £28,000 in gross rental income and earns a further £25,000 from self-employment.
The combined qualifying income is £53,000. The individual may therefore need to use Making Tax Digital, even though neither source exceeds £50,000 on its own.
Employment income taxed through PAYE, pensions, dividends and savings interest do not normally count towards the qualifying-income threshold. They may still need to be included when the final tax position is completed.
Making Tax Digital for Sole Traders in Leeds
MTD can apply to sole traders working in sectors such as:
• construction and property services;
• consultancy;
• cleaning;
• driving instruction;
• electrical and gas services;
• online retail;
• creative and digital services;
• delivery work; and
• other freelance or self-employed activities.
The threshold is based on turnover before expenses are deducted.
You may therefore need to use MTD even where your taxable profit is considerably lower than your total sales or fees.
Fletcher & Gill provides MTD and bookkeeping support to sole traders across Leeds and the surrounding areas.
• construction and property services;
• consultancy;
• cleaning;
• driving instruction;
• electrical and gas services;
• online retail;
• creative and digital services;
• delivery work; and
• other freelance or self-employed activities.
The threshold is based on turnover before expenses are deducted.
You may therefore need to use MTD even where your taxable profit is considerably lower than your total sales or fees.
Fletcher & Gill provides MTD and bookkeeping support to sole traders across Leeds and the surrounding areas.
Do limited companies need to use MTD for Income Tax?
No. MTD for Income Tax applies primarily to qualifying individuals with self-employment or property income.
Limited companies have separate company-accounting and Corporation Tax responsibilities.
However, a company director may personally need to use MTD if they also receive income from:
• a separate sole trade;
• freelance work;
• consultancy; or
• personally owned rental property.
Limited companies have separate company-accounting and Corporation Tax responsibilities.
However, a company director may personally need to use MTD if they also receive income from:
• a separate sole trade;
• freelance work;
• consultancy; or
• personally owned rental property.
What are quarterly updates?
A quarterly update is a summary of the income and expenses recorded in your compatible accounting software during the relevant reporting period.
Quarterly updates:
• are submitted using compatible software;
• are based on your digital bookkeeping records;
• may be required separately for different business activities;
• do not normally include every year-end tax adjustment; and
• are not four separate tax returns.
HMRC may use the information to provide an estimate of your developing tax position. This estimate can change once allowances, reliefs and year-end adjustments are included.
Quarterly updates:
• are submitted using compatible software;
• are based on your digital bookkeeping records;
• may be required separately for different business activities;
• do not normally include every year-end tax adjustment; and
• are not four separate tax returns.
HMRC may use the information to provide an estimate of your developing tax position. This estimate can change once allowances, reliefs and year-end adjustments are included.
What are the quarterly deadlines?
For most people using standard tax-year quarters, the deadlines are:
Reporting period Submission deadline
6 April to 5 July 7 August
6 July to 5 October 7 November
6 October to 5 January 7 February
6 January to 5 April 7 May
Some businesses may use calendar quarters instead.
Fletcher & Gill can confirm which reporting periods apply and prepare and submit the updates on your behalf.
Reporting period Submission deadline
6 April to 5 July 7 August
6 July to 5 October 7 November
6 October to 5 January 7 February
6 January to 5 April 7 May
Some businesses may use calendar quarters instead.
Fletcher & Gill can confirm which reporting periods apply and prepare and submit the updates on your behalf.
Speak to a Making Tax Digital accountant in Leeds
Fletcher & Gill helps landlords and sole traders across Leeds understand and manage Making Tax Digital for Income Tax.
Contact our Leeds accountancy team to check whether MTD applies and discuss the most suitable way to maintain your records and complete your submissions.
Telephone: 07596 355888
Clients supported: Landlords, sole traders and small businesses across Leeds and the surrounding areas
Contact our Leeds accountancy team to check whether MTD applies and discuss the most suitable way to maintain your records and complete your submissions.
Telephone: 07596 355888
Clients supported: Landlords, sole traders and small businesses across Leeds and the surrounding areas
Making Tax Digital for Sole Traders in Leeds
MTD can apply to sole traders working in sectors such as:
• construction and property services;
• consultancy;
• cleaning;
• driving instruction;
• electrical and gas services;
• online retail;
• creative and digital services;
• delivery work; and
• other freelance or self-employed activities.
The threshold is based on turnover before expenses are deducted.
You may therefore need to use MTD even where your taxable profit is considerably lower than your total sales or fees.
Fletcher & Gill provides MTD and bookkeeping support to sole traders across Leeds and the surrounding areas.
• construction and property services;
• consultancy;
• cleaning;
• driving instruction;
• electrical and gas services;
• online retail;
• creative and digital services;
• delivery work; and
• other freelance or self-employed activities.
The threshold is based on turnover before expenses are deducted.
You may therefore need to use MTD even where your taxable profit is considerably lower than your total sales or fees.
Fletcher & Gill provides MTD and bookkeeping support to sole traders across Leeds and the surrounding areas.
Do limited companies need to use MTD for Income Tax?
No. MTD for Income Tax applies primarily to qualifying individuals with self-employment or property income.
Limited companies have separate company-accounting and Corporation Tax responsibilities.
However, a company director may personally need to use MTD if they also receive income from:
• a separate sole trade;
• freelance work;
• consultancy; or
• personally owned rental property.
Limited companies have separate company-accounting and Corporation Tax responsibilities.
However, a company director may personally need to use MTD if they also receive income from:
• a separate sole trade;
• freelance work;
• consultancy; or
• personally owned rental property.
What are quarterly updates?
A quarterly update is a summary of the income and expenses recorded in your compatible accounting software during the relevant reporting period.
Quarterly updates:
• are submitted using compatible software;
• are based on your digital bookkeeping records;
• may be required separately for different business activities;
• do not normally include every year-end tax adjustment; and
• are not four separate tax returns.
HMRC may use the information to provide an estimate of your developing tax position. This estimate can change once allowances, reliefs and year-end adjustments are included.
Quarterly updates:
• are submitted using compatible software;
• are based on your digital bookkeeping records;
• may be required separately for different business activities;
• do not normally include every year-end tax adjustment; and
• are not four separate tax returns.
HMRC may use the information to provide an estimate of your developing tax position. This estimate can change once allowances, reliefs and year-end adjustments are included.
What are the quarterly deadlines?
For most people using standard tax-year quarters, the deadlines are:
Reporting period Submission deadline
6 April to 5 July 7 August
6 July to 5 October 7 November
6 October to 5 January 7 February
6 January to 5 April 7 May
Some businesses may use calendar quarters instead.
Fletcher & Gill can confirm which reporting periods apply and prepare and submit the updates on your behalf.
Reporting period Submission deadline
6 April to 5 July 7 August
6 July to 5 October 7 November
6 October to 5 January 7 February
6 January to 5 April 7 May
Some businesses may use calendar quarters instead.
Fletcher & Gill can confirm which reporting periods apply and prepare and submit the updates on your behalf.
Frequently Asked Questions About Making Tax Digital
Is the Make Tax Digital threshold based on turnover or profit?
The Making Tax Digital threshold is based on qualifying gross income before expenses, not taxable profit.
For a sole trader, this will normally be gross turnover. For a landlord, it will normally be gross property income.
If you have both self-employment and qualifying property income, the relevant amounts are generally combined when deciding whether you exceed the MTD threshold.
Making Tax Digital apply to landlords?
Yes. Making Tax Digital for Income Tax can apply to individual landlords where their qualifying property and self-employment income exceeds the relevant threshold.
It can apply even if you own only one rental property.
Does employment income count towards the MTD threshold?
No, not normally.
Employment income taxed through PAYE does not normally count towards the Making Tax Digital qualifying-income threshold.
The threshold is primarily based on qualifying gross income from self-employment and property.
What if I have both rental income and self-employment income?
Your qualifying property and self-employment income will normally be added together when determining whether you exceed the MTD threshold.
For example, £28,000 of gross rental income and £25,000 of gross self-employment income would give combined qualifying income of £53,000.
What must I submit every quarter?
You will normally submit summary totals of the income and expenses recorded in your compatible accounting software for the relevant reporting period.
Quarterly updates are based on your digital bookkeeping records and are not four separate tax returns.
I still need a year-end submission?
Yes.
You will normally still need to finalise your records after the tax year, make any necessary accounting or tax adjustments, report other taxable income or gains, claim relevant allowances or reliefs and confirm your final tax position.
Can my accountant manage Making Tax Digital for me?
Yes.
Once the necessary HMRC authorisations and software arrangements are in place, Fletcher & Gill can manage your digital bookkeeping, prepare and submit quarterly updates and complete the year-end tax work.
This means you do not necessarily need to operate the MTD accounting system yourself.
I need accounting software for MTD?
Yes. If Making Tax Digital for Income Tax applies to you, you will normally need compatible software to maintain the required digital records and submit information to HMRC.
The most appropriate software will depend on your business, property portfolio, transaction volume and how much bookkeeping support you require.
Fletcher & Gill can help you choose and set up a suitable system.
Can I use a spreadsheet for Making Tax Digital?
A spreadsheet may be capable of forming part of an MTD-compatible system where the required digital links and compatible submission software are used.
However, dedicated bookkeeping software can often make transaction recording, bank reconciliation and quarterly reporting easier.
We can advise on the most practical option for your circumstances.
Can I apply for an exemption from Making Tax Digital?
An exemption may be available in certain circumstances where using digital systems would not be reasonable or practical.
HMRC may consider factors including age, disability or health conditions, religious beliefs and difficulties obtaining suitable internet access.
HMRC makes the final decision on exemption applications.
How much does MTD accountancy support cost?
The cost depends on the amount of work required.
Factors can include the number of businesses or rental properties, transaction volume, the accounting software being used, the condition of your existing records and whether bookkeeping is included.
Fletcher & Gill provides a fixed quotation based on your circumstances, so the scope and cost of the service can be agreed in advance.
The Making Tax Digital threshold is based on qualifying gross income before expenses, not taxable profit.
For a sole trader, this will normally be gross turnover. For a landlord, it will normally be gross property income.
If you have both self-employment and qualifying property income, the relevant amounts are generally combined when deciding whether you exceed the MTD threshold.
Making Tax Digital apply to landlords?
Yes. Making Tax Digital for Income Tax can apply to individual landlords where their qualifying property and self-employment income exceeds the relevant threshold.
It can apply even if you own only one rental property.
Does employment income count towards the MTD threshold?
No, not normally.
Employment income taxed through PAYE does not normally count towards the Making Tax Digital qualifying-income threshold.
The threshold is primarily based on qualifying gross income from self-employment and property.
What if I have both rental income and self-employment income?
Your qualifying property and self-employment income will normally be added together when determining whether you exceed the MTD threshold.
For example, £28,000 of gross rental income and £25,000 of gross self-employment income would give combined qualifying income of £53,000.
What must I submit every quarter?
You will normally submit summary totals of the income and expenses recorded in your compatible accounting software for the relevant reporting period.
Quarterly updates are based on your digital bookkeeping records and are not four separate tax returns.
I still need a year-end submission?
Yes.
You will normally still need to finalise your records after the tax year, make any necessary accounting or tax adjustments, report other taxable income or gains, claim relevant allowances or reliefs and confirm your final tax position.
Can my accountant manage Making Tax Digital for me?
Yes.
Once the necessary HMRC authorisations and software arrangements are in place, Fletcher & Gill can manage your digital bookkeeping, prepare and submit quarterly updates and complete the year-end tax work.
This means you do not necessarily need to operate the MTD accounting system yourself.
I need accounting software for MTD?
Yes. If Making Tax Digital for Income Tax applies to you, you will normally need compatible software to maintain the required digital records and submit information to HMRC.
The most appropriate software will depend on your business, property portfolio, transaction volume and how much bookkeeping support you require.
Fletcher & Gill can help you choose and set up a suitable system.
Can I use a spreadsheet for Making Tax Digital?
A spreadsheet may be capable of forming part of an MTD-compatible system where the required digital links and compatible submission software are used.
However, dedicated bookkeeping software can often make transaction recording, bank reconciliation and quarterly reporting easier.
We can advise on the most practical option for your circumstances.
Can I apply for an exemption from Making Tax Digital?
An exemption may be available in certain circumstances where using digital systems would not be reasonable or practical.
HMRC may consider factors including age, disability or health conditions, religious beliefs and difficulties obtaining suitable internet access.
HMRC makes the final decision on exemption applications.
How much does MTD accountancy support cost?
The cost depends on the amount of work required.
Factors can include the number of businesses or rental properties, transaction volume, the accounting software being used, the condition of your existing records and whether bookkeeping is included.
Fletcher & Gill provides a fixed quotation based on your circumstances, so the scope and cost of the service can be agreed in advance.
Address
33 Great George Street, Leeds, LS1 3AJ
Phone
07596355888
Email
info@FletcherGill.co.uk