Overview
Making Tax Digital
Making Tax Digital (MTD) is HMRC's initiative to move the UK tax system online — replacing paper returns and once-a-year filing with real-time digital record-keeping and quarterly updates.
What is Making Tax Digital?
Making Tax Digital is a fundamental change to how individuals and businesses report their finances to HMRC. Instead of completing a single annual Self Assessment return, taxpayers are required to:
- Keep digital records of income and expenses throughout the year
- Submit quarterly updates to HMRC with running totals
- Complete a year-end Final Declaration to confirm the full-year figures
MTD was first introduced for VAT (MTD for VAT) and is now being extended to Income Tax through the MTD for Income Tax Self Assessment (MTD ITSA) programme, which becomes mandatory in phases from April 2026.
Who does MTD affect?
MTD ITSA affects self-employed individuals and landlords who receive income from:
Self-employment
Freelancers, contractors, tradespeople, and anyone running their own business.
UK property
Landlords with rental income from residential or commercial UK property.
Foreign property
UK residents with overseas rental income.
Multiple income sources
The £50k threshold applies to combined self-employment and property income.
PAYE employees whose only income comes from employment are not required to use MTD. Dividends and pension income also do not count towards the qualifying income threshold.
MTD rollout timeline
April 2026
£50,000+
Mandatory for sole traders and landlords with qualifying income above £50,000
April 2027
£30,000+
Extended to those with qualifying income above £30,000
April 2028
£20,000+
Extended further to those with qualifying income above £20,000
How quarterly updates work
Under MTD ITSA, the tax year (6 April to 5 April) is divided into four quarters. After each quarter closes, you have one month and seven days to submit your income and expenses for that period to HMRC.
| Quarter | Period | Deadline |
|---|---|---|
| Q1 | 6 Apr – 5 Jul | 5 August |
| Q2 | 6 Jul – 5 Oct | 5 November |
| Q3 | 6 Oct – 5 Jan | 5 February |
| Q4 | 6 Jan – 5 Apr | 5 May |
In addition, a Final Declaration must be submitted by 31 January following the end of the tax year.
What software do you need for MTD?
HMRC requires you to use approved MTD-compatible software to submit quarterly updates. You cannot use HMRC's own online portal to file MTD returns. Your software must:
- Connect to HMRC via an official API integration
- Keep digital records of income and expenses
- Submit quarterly updates to HMRC directly
- Include mandatory fraud prevention headers on all API calls
ArcTax is MTD ITSA compliant
ArcTax connects directly to HMRC's MTD APIs via OAuth 2.0 — no middleware, no third parties. Submit quarterly updates for self-employment, UK property, and foreign property income.
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