Making Tax Digital (MTD) is the HMRC’s push to move tax reporting entirely digitized.
While MTD for VAT has already been around for years, the biggest changes coming is that MTD will apply to self-employed people and landlords for Income Tax too.
So if you’re a sole trader, have rental income, or both, 2026 is the year this may begin for you. Here’s everything you need to know.
Making Tax Digital Key Points
- Making Tax Digital is the HMRC’s move toward fully digital recordkeeping and reporting for taxes.
- MTD for VAT is already live for VAT-registered businesses.
- MTD for Income Tax started on April 6, 2026 for sole traders and landlords with qualifying income over £50,000.
- A wider rollout will continue into 2027 and 2028 for lower income thresholds.
- Taxpayers will now need digital records and software that works with the HMRC.
What Is Making Tax Digital?
Making Tax Digital is an initiative to make keeping tax records and sending them to the HMRC digital, with the goal being to phase out older, more unreliable manual processes.
Older, more manual methods result in errors, out-of-date reporting, and people often would leave everything until the end of the tax year.
For VAT, MTD is already standard. For Income Tax, this move is significant because it changes how sole proprietors and landlords keep their records and report income throughout the year.
Related: HMRC Mileage Allowance Relief Explained
What Parts of MTD Are Already Live?
Let’s break things down - what’s already here and how MTD is set to expand.
MTD for VAT
MTD for VAT already requires VAT-registered businesses to keep digital records and file VAT Returns using compatible software.
This rolled out between April 2019 and 2022. For a lot of businesses, the idea of fully digital tax reporting is not new anymore.
MTD for Income Tax
This is the part that is actively changing.
From April 6, 2026, sole traders and landlords must use MTD for Income Tax if their qualifying income from self-employment and property is over £50,000.
That threshold then drops to £30,000 from April 6, 2027, and £20,000 the next year.
Related: UK Mileage Allowance Guide | What Is the 2026 HMRC Mileage Rate?
Who Does MTD for Income Tax Affect?
As of 2026, MTD for income tax mainly affects self-employed people, landlords, and people with both self-employment and property income.
The key number here is your qualifying income, which the HMRC bases on your total gross income from self-employment and property before expenses.
This isn’t just about profit. A person can fall into the current MTD threshold because of turnover or rental income levels even if their actual profit is much lower.
What Actually Changes Under Making Tax Digital
If MTD for Income Tax applies to you, you still will end up completing an annual tax process. However, you now also will need to do more during the year.
The biggest aspect is now needing to keep digital records of your income and expenses - so no more physical receipts or pen-and-paper mileage logs. You must also send quarterly updates to the HMRC through compatible software, and your end-of-year tax return information needs to be submitted digitally.
Self Assessment isn’t going away - it’s just that the recordkeeping and reporting involved is becoming digital and more continuous.
What Digital Recordkeeping Actually Means
With MTD, digital recordkeeping doesn’t meant “I have some notes somewhere on my laptop”. It means keeping your income and expense records in software that works with MTD, or in spreadsheets connected to bridging software that can make submissions to the HMRC.
If you’re self-employed, your digital records may need to include things like:
- Sales, takings, or fees
- Business expenses
- Dates
- Categories of income and costs
If you’re a landlord, it can include rental income and property expenses.
Related: How To Keep Track of Business Expenses for Taxes
Why MTD Matters for Mileage and Expenses
When the HMRC expects digital records and quarterly updates, it becomes a lot riskier to rely on scattered receipts, vague notes, or trying to remember your business mileage months later.
That’s especially true for sole traders and landlords who drive for work, visit properties, meet clients, or have regular travel expenses.
With manual mileage and expense tracking being phased out with MTD, the perfect solution exists on your phone - automatic mileage and expense tracking apps like TripLog.
For mileage, your trips are recorded automatically when you start driving and the recording stops when you stop. All HMRC-required details are captured and auto-categorized as business or personal based on your rules. Plus, you can scan your receipts via OCR receipt capture and download reports with ease.
How To Get Ready for Making Tax Digital
If MTD for Income Tax is going to apply to you, the main things you need to do are pretty simple:
- Check when you actually need to start
- Choose software that works with the HMRC
- Start keeping records digitally before your deadline hits
- Get into the habit of updating your income, expenses, and mileage regularly
This is one of those changes that will be much easier for people who prepare early than for people who way until the last minute.
Making Tax Digital FAQ
When does MTD for Income Tax start?
For people with qualifying income over £50,000, it started on April 6, 2026. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028.
Do I need special software?
Yes, if MTD applies to you, you need software that works with the HMRC. Note that the HMRC doesn’t provide the software itself.
Does MTD replace Self Assessment completely?
Not really. You still have an end-of-year process and still need to pay your tax bill by the usual deadline. The big difference is that you also have to keep digital records and send quarterly updates during the year.
What if I don’t meet the income threshold?
If your qualifying income is below the relevant threshold, MTD for Income Tax does not apply to you yet.
Making Tax Digital Explained: Conclusion
Making Tax Digital is not a brand-new idea in 2026, but it’s becoming a much bigger deal because Income Tax is now part of the rollout.
For affected sole traders and landlords, the real change is simple: more digital recordkeeping and more regular reporting. If you stay on top of your mileage and expenses as you go, MTD becomes a lot less painful.
If you’re looking for HMRC/MTD-compliant software to track your mileage and expenses, you’re in the right place. You can download TripLog on iOS or Android and start tracking unlimited miles automatically for free today!
