What is Making Tax Digital?
30-second answer
Making Tax Digital (MTD) is an HMRC initiative to modernise tax reporting by moving businesses and landlords towards digital record keeping and digital tax reporting.
For qualifying sole traders and landlords, this means moving from a once-a-year tax routine to keeping digital records and sending more regular updates to HMRC through compatible software.
Some people use an accountant. Some use full accounting software. Others use MTD-compatible software designed to work alongside spreadsheets.
This guide is most relevant if you are:
- A sole trader or landlord
- Someone who currently uses spreadsheets
- Looking for a simpler alternative to bookkeeping software
- Trying to understand whether MTD applies to you
This guide covers
This guide is provided for general information only and is based on HMRC guidance available at the time of writing.
HMRC describes Making Tax Digital for Income Tax as a new way for sole traders and landlords to keep records and report income and expenses. It's all about moving tax records from paper and manual processes to a digital one.
MTD is already in place for VAT-registered businesses and is gradually expanding to capture more business types.
HMRC says that anyone within the scope of Making Tax Digital for Income Tax needs to:
- Sign up for Making Tax Digital for Income Tax when required
- Use software that is compatible with MTD
- Send quarterly updates to HMRC through compatible software
- Submit their end-of-year tax return through compatible software
In short
MTD is not just an online form, it's a process. You'll need to keep your records digitally, send HMRC updates throughout the year and use software that can connect to HMRC's systems.
Making Tax Digital for Income Tax is being introduced in stages for sole traders and landlords based on qualifying income from self-employment, property income or both.
Qualifying income is based on your total turnover (income before expenses) from the previous tax year.
- £50,000 + - You need to use MTD for the 2026 to 2027 tax year.
- £30,000 + - You need to use MTD for the 2027 to 2028 tax year.
- £20,000 + - You need to use MTD for the 2028 to 2029 tax year.
MTD changes how records are kept and how information is sent to HMRC.
Under MTD, records need to be kept digitally.
For sole traders and landlords, that means keeping digital records of income and expenses rather than relying on paper records or manually pulling everything together at the end of the year.
If you're already using spreadsheets, you're probably further along than you think.
Under MTD, HMRC requires a clear digital link from your individual transactions all the way through to submission.
A digital link is simply a digital transfer of information (transactions, totals and submissions) between records, spreadsheets or software without someone manually typing the figures again.
It sounds technical, but in practice many spreadsheet users already use digital links through the use of formulas.
One of the biggest changes is that information is sent to HMRC more regularly.
Instead of only thinking about tax once a year, you'll need to send quarterly updates through compatible software.
These updates are summaries of your income and expenses, not full tax returns, but they do mean tax reporting becomes a more regular process.
You still need to submit your tax return and pay tax due by 31 January after the end of the tax year.
What's changed is that your tax return will need to be submitted using MTD compatible software, rather than how you may have submitted previously.
The final tax return submission should theoretically be easier due to the quarterly updates already submitted.
This is arguably the most important change of all.
HMRC requires all submissions, quarterly and final, to be done through MTD compatible software.
Compatible software does not necessarily mean a complicated bookkeeping system.
There are many different routes available including accountant-managed services, accounting platforms and spreadsheet-friendly bridging software.
In short
The biggest change under MTD is how, and how often, information is submitted to HMRC.
The key requirement is making sure your records all form part of a digital process that uses compatible software.
One of the biggest changes under Making Tax Digital is the introduction of quarterly updates.
Anyone signed up to MTD needs to send quarterly updates to HMRC using compatible software for each income source (self-employment and/or property).
Submitted every three months, quarterly updates are a summary of your income and expenses up to that point in the tax year.
They are cumulative, which means each submission includes all income and expenses from the start of the tax year. So you're building on previous updates, rather than starting from scratch each quarter.
In short
Quarterly updates are not full tax returns. They are regular summaries of your income and expenses based on your digital records.
This is one of the biggest misconceptions about Making Tax Digital. When people hear the word "software", they often assume they need to move everything into a full accounting package. That's not necessarily the case.
Compatible software is software that can communicate with HMRC's MTD system and send the required information electronically.
The important thing is that your income and expenses are stored digitally, the figures move through a digital process, and the required information can be submitted to HMRC using compatible software.
Many sole traders and landlords keep their records in Excel or Google Sheets and use MTD-compatible software to prepare and submit information to HMRC.
In short
It is your choice whether your records are kept in a spreadsheet, an accounting package or by an accountant. What matters is that the information is stored digitally and can be submitted to HMRC through compatible software.
There is no single way to handle Making Tax Digital.
The right route depends on how you keep records, your confidence, your budget, how much support you want and how complex your business or property income is.
Some sole traders and landlords choose to work with an accountant who manages much of the MTD process on their behalf.
This can be helpful if you want professional support, have more complex records, or simply prefer not to deal with the admin yourself.
It is often the most expensive option over time, but for many people the peace of mind is worth it.
A number of accounting platforms are built around a full finance package - bank feeds that pull in transactions automatically, expense categorisation, invoicing, and direct submission to HMRC.
This suits people who want everything in one place and are comfortable working within a full accounting system.
Some business bank accounts now include MTD-compatible tools built directly into the account, so if you already bank with a provider that offers this, it may be worth checking what is available.
MTD-compatible software covers a broader range of tools designed specifically to meet the Making Tax Digital requirements without the full bookkeeping overhead.
This includes tools built for landlords or sole traders with simpler income and spreadsheet-based approaches where records are kept in Excel or Google Sheets and connected to bridging software that handles the HMRC submissions.
This software can suit people whose income is relatively straightforward and those who prefer to maintain control of their finances.
Yes. Spreadsheets can form part of a Making Tax Digital process.
HMRC requires digital records and software that works with Making Tax Digital. That does not automatically mean spreadsheet users must move everything into a full accounting platform.
The key question is whether the spreadsheet records can form part of a digital link that connects with software that can read and submit the required information to HMRC.
In short
You can use spreadsheets but they need to work with software that can submit the required information to HMRC.
A digital link is simply a way of moving information from one place to another digitally, without manually typing the same figures out again.
HMRC requires a digital link from transaction through to submission as part of the MTD process.
If you use full accounting software, the digital link is generally built in so your transactions feed directly through to your submissions, without you needing to do anything extra.
If you use a spreadsheet, a digital link might be a formula that pulls your income total from one sheet into a summary sheet, or uploading your spreadsheet directly into bridging software rather than typing the figures in manually.
In short
A digital link is a way of transferring information between transactions, records, spreadsheets or software without manually re-entering the data.
suiteSheets is MTD-compatible bridging software designed for sole traders and landlords who prefer a spreadsheet-based approach to Making Tax Digital.
Instead of moving everything into a bookkeeping platform, you can work with a full suiteSheets template or simply add the Overview sheet to your existing spreadsheet.
suiteSheets templates are designed for simple, practical record-keeping and work in both Excel and Google Sheets.
When a submission is due, you simply upload your spreadsheet to your suiteSheets account. Our system reads the totals directly from your Overview sheet, shows them clearly on screen, and asks you to confirm that everything looks correct. Once you're happy, you can submit the figures straight to HMRC.
Full suiteSheets template
Ideal if you want a clean, fresh start to your record keeping.
- Income and expense sheets
- Overview sheet built in - figures calculate automatically
- Quarterly profit/loss totals ready to review and submit
- Works in Excel and Google Sheets
- HMRC recognised categories
Overview sheet only
Ideal if you have a spreadsheet set up and want to keep it.
- Simply add our Overview sheet to your current spreadsheet
- Input a simple formula to link your existing totals
- Works in Excel and Google Sheets
- HMRC recognised categories
Making Tax Digital is HMRC's system for digital record keeping and digital tax reporting.
Making Tax Digital for Income Tax is being introduced in stages for sole traders and landlords based on qualifying income from self-employment and property. The thresholds are over £50,000 from April 2026, over £30,000 from April 2027 and over £20,000 from April 2028.
MTD changes how records are kept and how information is reported during the year. HMRC still says users need to submit their tax return and pay tax due by 31 January after the end of the tax year.
Quarterly updates are summaries of income and expenses sent to HMRC every 3 months using compatible software.
Not necessarily. Some people use an accountant to manage the process, while others manage their own records and submissions using software that works with Making Tax Digital. The right option depends on your circumstances and how much support you want.
You need software that works with Making Tax Digital, but that does not always mean you need a full accounting platform. Some users choose full accounting software, while others prefer MTD-compatible software designed around a simpler workflow.
Yes. Spreadsheets can form part of a Making Tax Digital process, provided the records and submissions work through bridging software that meets MTD requirements and includes a proper digital link.
If you are required to use MTD for Income Tax, you need to sign up. HMRC says anyone required to use it from the 2026 to 2027 tax year should sign up as soon as they can.
This guide is provided for general information only and is based on HMRC guidance available at the time of writing.
suiteSheets is software for spreadsheet users. We do not provide tax advice, accounting advice or legal advice. If you are unsure how Making Tax Digital applies to your circumstances, contact HMRC or a qualified adviser.
These HMRC pages provide further context on Making Tax Digital for Income Tax, eligibility, digital records, compatible software and signing up.
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suiteSheets is MTD-compatible software designed for sole traders and landlords who prefer a spreadsheet-based approach to Making Tax Digital.
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