Making Tax Digital (MTD) is HMRC’s move toward a more digital tax system. Instead of keeping your business records on paper or in a basic spreadsheet and submitting your Self-Assessment once a year. MTD requires certain self-employed people and landlords to keep digital records and send to HMRC regular updates using compatible software.. This can sound complicated and expensive, but it doesn’t have to be. Here’s a simple breakdown of what it means and what you need to do. 

Who needs to use Making Tax Digital?

MTD for income Tax is being introduced in stages. 

From 6 April 2027 you will need to use MTD if your income is more that £30,000.00 for the 2025/2026 tax year. 

Income in this context is all income from self-employment or property before expenses are deducted. This can also be referred to as Turnover. 

What do I actually need to do?

• Keep your business income and expenses recorded digitally, using accounting software.
• The software you use must be MTD-compatible. 
• Send HMRC a summery of your income and expenses every three months (quarterly)
• Continue to pay any tax you owe by the usual deadlines.

The quarterly updated are not the same as four separate tax returns, they essentially regular updates to HMRC showing what your business has earned and spent during this three month period.

What software do I need? 

Online accounting software is a paid subscription service, they come with a range of additional services and prices. You will need to set this up and register yourself with MTD before April 6 2027. 

There are a number of options available to you. You can find these easily online, but a few to be named: Xero, QuickBooks, GoSimpleTax, FreeAgent and other HMRC recognised providers.

The right choice will depend on your business, how much bookkeeping you do yourself and what features you need. Some software is designed to make bookkeeping simple while others have more advanced features. 

Personally I use QuickBooks and find it straightforward to use with different subscription options depending on what you need.

Will MTD be an extra cost?

Potentially yes -  however the subscription costs are also a business expense so can be included in your company expenses, usually under “subscriptions” or “bookkeeping and accounting” . There are free and lower cost software options available, so do not assume that MTD is an automatic additional cost to you.

What should I do now?

• Check MTD applies to you
• Look at your current bookkeeping system and choose a compatible software
• Start getting used to keeping your records digital
• Make sure you understand the quarterly reporting requirements

Need Help to switch from manual to software accounting, get in touch with Dorset Bookkeeping and we can assist you with choosing the right software for you and how to easily transition. 

The MTD HMRC website if you would like more information: Choose the right software for Making Tax Digital for Income Tax - GOV.UK

Published: August 2026