Key takeaways
- MTD for Income Tax rolling out in waves; the first waves have been postponed to later in the decade.
- You use MTD-compatible software to keep digital records and send quarterly updates to HMRC.
- Quarterly updates replace the old return, but a final End of Period Statement and a final declaration remain.
- If you are already VAT-registered you may already use MTD for VAT, so the software will feel familiar.
- Getting ready now means keeping every invoice and expense digitally — the habit, not the deadline, is the hard part.
What Making Tax Digital actually is
Making Tax Digital (MTD) is HMRC's programme to move tax record keeping and reporting online. Under MTD you do not email spreadsheets or figures to HMRC in the old way — instead you keep your business records in MTD-compatible software and send HMRC updates from that software, in standard JSON formats, via APIs.
There are two tracks. MTD for VAT has been live since 2019: most VAT-registered businesses already keep digital records and file VAT returns through software. MTD for Income Tax (MTD ITSA) brings the same concept to sole traders, landlords and partnerships who do not have the VAT obligation.
Who MTD ITSA applies to
MTD ITSA applies to sole traders and self-employed landlords with qualifying business or property income. The rollout has been staged and postponed more than once: the early waves have repeatedly been pushed back, with the current published timeline moving the first mandatory waves later in the decade. Whether you are inside the current first wave, inside a later wave, or simply planning ahead, the mechanics of MTD ITSA described below are the settled part — the exact start date for any given group is what keeps shifting, so check HMRC’s current rollout page before acting.
In every version of the plan, the thresholds and the journey are the same:
- Above the qualifying threshold for business or property income — mandatory, in the wave that applies to you.
- Below the threshold — not currently required, but you can voluntarily join.
- Only income from self-employment and residential property is in scope; employment income and other sources stay outside.
How it works
Keep digital records
Every income (your issued invoices) and expense must be recorded digitally in MTD-compatible software. No more paper ledger; the software holds the record.
Send quarterly updates
Four times a year the software sends HMRC a summary of your income and expenses. This replaces most of the information that used to be gathered once a year.
End of Period Statement + final declaration
Once the year ends you confirm your quarterly updates with an End of Period Statement, then make the final declaration of any income and gains not captured above — the closest thing to the old Self Assessment stamp.
What it means for your invoices
For a self-employed person the day-to-day reality of MTD is that your invoices and receipts are the raw material. The invoices you issue are your income records; the receipts are your expenses. Getting those two sets in order is the whole job — the software and the quarterly update are just plumbing on top. A tool like our sole trader invoice template that produces a proper digital invoice for every job is already building the MTD record as you go.
How to get ready without waiting
Nothing about MTD happens overnight, and nothing about getting ready needs to either. The habits that work under MTD are the same good habits that work under the old return: issue a digital invoice for every job; keep a record of every expense digitally; reconcile the two each month. If you do that, whichever wave you land in, the software enrolement is the only new thing — and the record keeping is already done.
Start the habit that MTD rewards
Issue a digital invoice for every job now, and your income records are already in shape for whichever MTD wave applies to you.
Frequently asked questions
What is Making Tax Digital for Income Tax?
HMRC’s programme of digital record keeping and reporting for income tax. Sole traders and landlords in scope keep digital records in MTD-compatible software and send quarterly updates, then an End of Period Statement and final declaration at year end.
Who has to follow MTD ITSA?
Sole traders and self-employed landlords with qualifying business or property income are in scope, with the rollout staged in waves that have been postponed over time. Check HMRC’s current rollout page for the date that applies to you.
Does MTD replace Self Assessment?
Not exactly. The quarterly updates replace much of the information gathering, but you still complete an End of Period Statement and a final declaration of any remaining income and gains each year.
Do I need special software for MTD?
Yes — for MTD ITSA you must keep digital records and file through HMRC-recognised compatible software. If you are already VAT-registered, the MTD VAT software you use is likely compatible or on the same platform.
Can I use spreadsheets for MTD?
Spreadsheets can be used if they are linked to MTD-compatible software that submits the data to HMRC. A plain spreadsheet on its own does not meet the digital record keeping requirement.
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General guidance only — not legal, tax or accounting advice. Rules and rates can change; check HMRC's current guidance for the latest. Last reviewed 8 October 2026.