MTD Readiness Checklist Trending

Making Tax Digital for Income Tax Self Assessment lands on self-employed people and landlords with qualifying income above £50,000 from April 2026, with the £30,000 to £50,000 band following in April 2027 and the £20,000 to £30,000 band in April 2028. From that point records have to be kept digitally and quarterly updates sent to HMRC through MTD-compatible software. Each update is due on the 7th of the month after the quarter ends, and at the end of the year a Final Declaration replaces the Self Assessment return, falling due on 31 January following the tax year. The End of Period Statement in the original design was scrapped before launch, so there is no separate year-end business return.

The programme has been arriving in stages for years. VAT came first, in April 2019 for VAT-registered businesses above the £85k threshold and then in April 2022 for all of them. Income Tax was originally set for April 2023, was deferred to 2024 and then rescheduled to April 2026 for qualifying income over £50k, April 2027 for over £30k and April 2028 for over £20k. That makes 2026/27 the first tax year filed under the new system for anyone in the opening band. Whether you are caught is judged on your 2024/25 qualifying income from self-employment and property, and the 2025/26 Self Assessment return, due by 31 January 2027, is still filed the old way as the last one before the change.

Quarters end on 5 July, 5 October, 5 January and 5 April, and each update is due on the 7th of the following month: 7 August, 7 November, 7 February and 7 May. For anyone brought in at the start, the first quarterly update was due on 7 August 2026 and covered 6 April to 5 July 2026. Whether your bookkeeping can actually produce a credible figure within a month of each quarter end is often the real test, rather than the software itself.

Penalties run on points rather than flat fines. Each late submission adds a point, and once you hit the threshold, which is 4 points for quarterly obligations, a £200 penalty is triggered for that submission and for every late one afterwards. Late payment is charged separately, as a percentage of the tax still unpaid. HMRC has said it will not apply penalty points for late quarterly updates during 2026/27, the first MTD year, although the updates still have to be sent before the tax return can be submitted and points still apply to a late return. The structure mirrors the regime already used for MTD for VAT, so a business that has been filing VAT digitally will recognise how it behaves.

Readiness is scored across several things at once. The first is whether you already use MTD-compatible accounting software, with spreadsheets counting where they are linked to HMRC through bridging software. The second is whether income and expense records are digital from the point of transaction rather than typed up months later. Then comes whether you can generate and submit quarterly summaries through the API, and whether the bookkeeping already categorises income and expenses to the level HMRC expects. Whether your tax agent is prepared, whether you have tested submissions in HMRC's sandbox environment, and whether the business can meet quarterly deadlines all feed into the score as well.

Choosing software a good year ahead leaves room to find the problems before they matter. FreeAgent comes free with NatWest and RBS business banking, Xero's basic tier is £14 a month, QuickBooks £10, Sage £14, and FreshBooks is another option, with HMRC publishing the approved list. Spreadsheets stay allowed when paired with bridging software, including free tools such as Bridge Software and 100PcVATFreeBridge. Whatever you use, the digital links rule means figures have to move from source records to submission without being re-typed by hand. Receipts can be scanned into the software or kept on paper for 5 years, and an accountant for the first MTD year typically costs £600 to £1,500.