Making Tax Digital
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What Is Making Tax Digital?
Making Tax Digital (MTD) is a program to make the entire UK tax system online. In the past, taxes were filed only once at the end of the year. But according to the new rules of HMRC, taxpayers will have to keep digital records using HMRC-approved software. At the same time, they will have to submit updated information about their income and expenses to HMRC every quarter. The goal is to make tax reporting more accurate and up to date — less room for end-of-year errors, and a clearer picture of what you owe all over the year.
MTD is not just about using new software. It is a whole new accounting system — one that will cost you a fortune if you don’t do it right.
Key MTD Dates & Thresholds
April 2026
If the annual income is over £50,000 for a sole proprietorship or property, then ITSA is mandatory for MTD.
April 2027
As the threshold decreases, a significantly larger group of self-employed people and landlords will be brought into MTD.
April 2028
The threshold decreases again to £20,000. At this stage, about 2.9 million people will have to comply with these new tax rules.
Quarterly Submissions
Once you fall within the rules, you must send your income and expenses to HM Revenue and Customs every three months. You need to submit each update by the 7th day of the month after the quarter ends. If your reporting period is from 6 April to 5 July, you must submit it by 7 August.
Who Does MTD Affect?
Who Is in Scope?
MTD for Income Tax Self Assessment (ITSA) applies to you if your annual gross income is over £50,000 and if you are self-employed, whether you are a freelancer, a consultant, a tradesperson or run any type of sole trade.
One important distinction: this threshold is based on your gross income, not your profit. That means the total you bring in before any expenses are taken off. Instead of assuming you are out of the scope, always check if you’re close to the threshold or not.
What Records Must Be Kept Digitally?
Under MTD, paper records and informal bookkeeping are no longer acceptable. HMRC requires the following to be stored digitally, in approved software:
- Each business income entry — including date, amount, and source
- All allowable business expenses
- Income and expenses are correctly categorised
- Records held in HMRC-approved software or a spreadsheet linked to bridging software
Quarterly Deadlines
You’ll make four quarterly submissions per year, each due within one month and seven days of the quarter ending. On top of those, a Final Declaration must be submitted by 31 January — this replaces your traditional Self Assessment tax return.
- 1st Quarter: 6 April – 5 July → deadline 7 August
- 2nd Quarter: 6 July – 5 October → deadline 7 November
- 3rd Quarter: 6 October – 5 January → deadline 7 February
- 4th Quarter: 6 January – 5 April → deadline 7 May
- Final Declaration → deadline 31 January
How TAJ Handles It for You?
TAJ Accountants handle all the work for you — you just have to provide the correct information.
- QuickBooks, Xero & FreeAgent setup and training included — no extra cost
- All four quarterly submissions and your Final Declaration were prepared and submitted on your behalf by HMRC-authorised agents
- Real-time support from highly qualified accountants throughout the year — not just at deadline time
- Free eligibility assessment included — know exactly where you stand before you commit to anything
- Bridging software setup available for spreadsheet users — we make your existing records HMRC-compliant without disrupting your current workflow
- Combined income assessment for landlords and sole traders with multiple income sources — we make sure your threshold is calculated correctly.)
Combined Income Threshold Explained
HMRC combines your rental income and any self-employment income when assessing whether you’re in scope. If the two added together are over £50,000, then MTD will apply to you from April 2026.
For example: £30,000 rental income plus £25,000 part-time self-employment income (such as freelancing, consultancy or trading) equals £55,000 – you’re in scope even though neither income source alone would bring you into scope.
London-Specific Complications
These aren’t minor technicalities — getting any of them wrong on your quarterly submissions can lead to penalties and a difficult correction process later.
- HMO Licensing: If your property has three or more tenants and is licensed as a House in Multiple Occupation, income and expense categorisation must be done separately. Incorrect categorisation can lead to penalties.
- Renters’ Rights Act (expected 2025/2026): This law focuses on tenancy reform (such as ending ‘no-fault’ evictions and ending fixed-term tenancies), but it does not change how you calculate tax-deductible expenses. When it comes into effect. It will be difficult to correct later if MTD records are not correct from the start.
- Multiple Tenants: Each rent must be recorded separately, and shared expenses must be split correctly if a property has more than one tenant.
These details matter — and they catch a lot of London landlords off guard. HMC licensing, multiple tenancies, and combined income thresholds all need to be handled correctly from day one. Getting it wrong doesn’t just mean extra admin — it can mean penalties and months of corrections.
See how we handle property accounting →
TAJ specialises in exactly this. We handle the categorisation, the combined threshold calculations, and the quarterly submissions — so none of this falls on you.
TAJ’s Property Accounting Expertise
TAJ Accountants is not just a general accountancy firm — we have in-depth knowledge of the London property market.
- Prepare separate MTD records for House in Multiple Occupation, buy-to-let, and mixed-use properties.
- Set thresholds by correctly combining rental income and self-employment income
- Categorise expenses, taking into account the impact of the Renters’ Rights Act
- Ensure property-specific compliance in each quarterly submission)
MTD for Corporation Tax — Not Mandatory Yet, But It's Coming
HMRC has confirmed that MTD for Corporation Tax is not mandatory yet. So if you’re worried about quarterly submissions for your limited company, you don’t need to be, not right now.
However, it is coming. April 2027 is the direction of travel. Limited companies that get their digital records and software in order now will have a far easier transition when it becomes compulsory. If you want to get ahead of it rather than scramble when the deadline arrives, we can help you set it up correctly today. Also, we set up your MTD as a part of the voluntary.
MTD for VAT — Mandatory Since 2019
If your company is VAT-registered with a turnover above £90,000, MTD for VAT has been mandatory since 2019. VAT returns must be submitted through HMRC-approved software — manual submissions and direct spreadsheet uploads to the HMRC portal are no longer acceptable.
Many businesses are still not doing this correctly. TAJ handles full VAT compliance for our clients. For more information, visit our VAT Service page.
The MTD Penalty System — What You Need to Know
Missing MTD deadlines isn’t just an inconvenience — HMRC’s points-based penalty system is designed to escalate quickly.
How the Points System Works
You will receive one penalty point for each missed quarterly submission. Four points will result in a £200 penalty — and then another £200 for each missed deadline.
1
1 point Warning
2
2 points
3
3 points
4
4 points £200 fine
5+
Threshold Reached £200 for every subsequent late submission"
The Soft Landing Period — And Its Limits
HMRC ensured a soft landing for 2026/27. Means you will get extra time to comply with digital processes. Also, no penalty points will be added for late quarterly submission in the first year. It will help a business to set step by step with MTD. Even penalties will apply if you submit your final declaration late or miss payment deadlines during the soft landing period. And if you’re joining in April 2027 or 2028, the soft landing doesn’t apply to you at all.
What many people don’t realise is that the soft landing only covers penalty points — it doesn’t protect you from submitting incorrect records, miscategorising income, or setting up your software incorrectly. HMRC can still flag errors. And mistakes made in the first quarter don’t stay in the first quarter — they carry forward, compound, and become significantly harder to correct the longer they’re left.
The soft landing exists for genuine oversights, not as a substitute for proper setup. By the time most people realise something has gone wrong, they’re already several months into incorrect submissions.
The cost of getting this wrong far outweighs the cost of getting it right from the start. That’s exactly what TAJ is here for.
Set up MTD correctly with TAJ from the start — don’t take the risk.
TAJ's MTD Service: What We Do For You
MTD involves more moving parts than most people expect — the right software, quarterly deadlines, correct income categorisation, and a Final Declaration on top. We handle all of it.
Here’s what working with TAJ looks like:
Your Problem | How TAJ Handles It |
Not sure which software to use | We set up QuickBooks, Xero or FreeAgent — included as standard, no extra cost |
Worried about missing a deadline | All four quarterly submissions and your Final Declaration managed on your behalf |
Still working in spreadsheets | We connect your existing records to HMRC-approved bridging software — no disruption to your workflow |
Don’t know if MTD applies to you | Free eligibility assessment — we check your income sources and give you a straight answer |
Multiple income sources | We correctly combine your self-employment and property income to calculate your threshold accurately. |
Need to register with HMRC | We handle your MTD registration as an HMRC-authorised agent — you don’t deal with HMRC directly |
Need ongoing support | Dedicated accountants available throughout the year — not just at deadline time |
Software We Use — And Why It Matters
TAJ Accountants is a QuickBooks Elite ProAdvisor in London and an Intuit Council Member. Elite isn’t just a badge.
In practical terms, this means we receive Intuit’s most advanced MTD training, we’re among the first to access new MTD-related features, and we have a direct line to QuickBooks support that standard advisors don’t.
For you, that means your MTD setup is done by people who know the software inside out — not someone who completed a basic certification course.
MTD Timeline: What Happens & When
MTD for ITSA becomes mandatory for those with an income over £50,000
First Quarterly Deadline
Second Quarterly Deadline
Third Quarterly Deadline.
Fourth Quarterly Deadline.
Final Declaration submission deadline
The £30,000 threshold for income is now in place, which means more people will be covered by MTD.
£20,000 threshold — around 2.9 million taxpayers will be covered by MTD.
Our Services
Personalised MTD Support
Dedicated accountants who understand MTD requirements for your specific income type and business setup.
MTD Software Setup
We onboard you onto HMRC-compatible software — QuickBooks, Xero or FreeAgent — and manage your digital records.
Quarterly Update Filing
We prepare and submit all four quarterly updates to HMRC on your behalf, accurately and on time.
Final Declaration
Full preparation and submission of your end-of-year final declaration, replacing the traditional Self Assessment return.
MTD for VAT Compliance
Full handling of VAT returns and digital record-keeping in line with MTD for VAT rules already in effect.
MTD Planning & Advice
Strategies to legally minimise your tax liability and maximise take-home pay under the new MTD system.
UTR & HMRC Registration
We handle your Self Assessment and MTD registrations and arrange your UTR with HMRC on your behalf.
Bookkeeping & Record-Keeping
Ongoing digital bookkeeping to ensure your records are MTD compliant throughout the year.
Tax Investigation Support
If HMRC inquires about your MTD records or submissions, our team manages the correspondence and represents you directly.
Bridging Software Setup
We transform your existing records with HMRC-approved bridging software, so you can remain compliant without changing the way you work.
Not Sure Where to Start?
Ready to get MTD sorted? Book a free 15-minute consultation with our team. We’ll assess your situation, tell you whether MTD applies to you, and give you a clear plan — at no cost and with no obligation.
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