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What is Making Tax Digital, in plain English?

The change in a paragraph. What actually moves, what stays the same, and what a typical year looks like.

3 min read

Making Tax Digital for Income Tax, usually shortened to MTD or MTD ITSA, is a change to how sole traders and landlords report their income tax to HMRC. It starts on 6 April 2026.

What actually changes

Today, most sole traders and landlords file one Self Assessment return per tax year, by 31 January. With MTD, you'll do three things:

  1. Keep digital records. You record your income and expenses in HMRC-recognised software as you go, instead of on paper or in an un-linked spreadsheet.
  2. Send four short quarterly updates. Every three months, your software sends a summary of your income and expenses so far that tax year to HMRC. These are totals, not individual transactions.
  3. Submit a final declaration once a year. By 31 January, you confirm your figures for the year and add anything that wasn't in the quarterly updates (employment income, pensions, interest, reliefs, etc.). This replaces the Self Assessment return.

That's it. Three things.

What doesn't change

  • Your tax rates, allowances and reliefs. Identical.
  • The payment deadline. Income tax and National Insurance are still due by 31 January after the tax year ends.
  • The tax year dates. Still 6 April to 5 April.
  • The final deadline to report the year's figures. Still 31 January.

What a typical year will feel like

For a sole trader with £60,000 of turnover, a normal MTD year looks like:

  • Each week or month: when money comes in or goes out, it gets recorded in your software, often just by tapping a transaction from your bank feed and assigning it.
  • Four times a year (August, November, February, May): your software sends the quarterly update. In practice this is usually a button click once you've reconciled your records.
  • Once a year, after 5 April: you (or your accountant) review the year, add any non-business income, claim reliefs, and submit the final declaration by 31 January.
  • By 31 January: pay any tax and National Insurance due.

That's the shape of it. No surprise forms, no year-end scramble through a shoebox of receipts.

The common worries, up front

  • "Am I paying tax four times a year now?" No. You still pay once, by 31 January. Quarterly updates are just summaries.
  • "Do I have to enter every receipt?" No. You record totals for each transaction. Keep the original receipts or bank statements somewhere safe, like you do now, but you don't have to type them in line-by-line.
  • "Does my whole business have to change overnight?" No. You keep doing the same work. Only the admin side moves from paper/annual to digital/quarterly.
  • "Will this cost a lot?" There are free software options if your affairs are simple. Paid options start around a fiver a month. See Choosing software.

Why is HMRC doing this?

The short answer is fewer errors and more real-time information. The Self Assessment system was designed for paper; the digital switch lets HMRC check figures earlier, and gives you an in-year view of where you stand rather than a January surprise.

You don't need to agree with the policy to be ready for it. Being ready is just a question of having software in place and knowing the dates.

Summary

If you already keep reasonably tidy records and you're willing to use accounting software, MTD adds surprisingly little work. If your current approach is a shoebox and a panic in January, MTD will feel like a real change, but arguably the sort of change that leaves you better off by the end of the first year.

Kite is designed to handle the mechanics so you can focus on the business. The rest of this library explains the details.

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