What Making Tax Digital actually is
Making Tax Digital for Income Tax, also called MTD for ITSA, replaces the old system of one annual Self Assessment return with digital record keeping and quarterly updates sent to HMRC throughout the year, followed by a final declaration at year end. It's HMRC's move away from paper-based, once-a-year reporting.
It's already live. MTD for Income Tax started on 6 April 2026 for sole traders and landlords with qualifying income above £50,000.
Are you actually affected right now
It depends entirely on your qualifying income, which means gross income from self employment and property, before any expenses or allowances are deducted. Not profit, turnover.
HMRC checks this against your most recently filed Self Assessment return. For the current phase, that means your 2024/25 return. If your gross self employment income (plus any property income, if you have it) was over £50,000 on that return, you're in scope now.
Below £50,000, you're not affected yet, but the threshold is dropping in stages, so it's worth knowing what's coming.
The full rollout timeline
Above £50,000: mandatory from April 2026, already in force.
Above £30,000: mandatory from April 2027.
Above £20,000: mandatory from April 2028.
Most sole traders currently filing Self Assessment will eventually fall into one of these phases. If you're a PT, tutor, cleaner or tradesperson turning over somewhere in the £20k-£50k range, April 2027 or 2028 is realistically when this becomes your problem, not right now, but worth having on your radar rather than a surprise.
What actually changes if you're in scope
Instead of one Self Assessment return a year, you'll need to keep digital records of your income and expenses, submit a quarterly update to HMRC roughly every three months, and complete a final declaration at the end of the year, which replaces the old annual return and finalises what you owe.
The records need to be kept using MTD-compatible software, or bridging software that connects a spreadsheet to HMRC's system. A paper notebook or a plain spreadsheet with no digital link to HMRC won't satisfy the requirement once you're in scope.
The deadline that's closer than people think
If you're already in the first wave (over £50,000), the first quarterly update deadline is 7 August 2026. If that applies to you and you haven't sorted software or started digital record keeping yet, this is genuinely urgent, not a someday task.
Who's exempt
A few groups are automatically excluded: people who are digitally excluded due to age, disability, or lack of reasonable internet access, people without a National Insurance number, and certain Lasting Power of Attorney cases. Unincorporated partnerships are also outside MTD for Income Tax for now, with no confirmed date for inclusion. Limited companies aren't affected by this particular scheme at all, MTD for Corporation Tax hasn't been implemented.
If you think you might qualify for a digital exclusion exemption, you need to apply to HMRC directly, it isn't automatic just because you find digital tools difficult.
What to actually do now, depending on where you sit
If you're already over £50,000, get MTD-compatible software in place immediately if you haven't already, the first deadline is close.
If you're between £30,000 and £50,000, you've got until April 2027, but it's worth getting familiar with digital record keeping well before then rather than scrambling in early 2027 alongside everyone else in the same position.
If you're under £30,000, you've got more breathing room, April 2028 at the earliest, but the direction of travel is clear: HMRC is moving everyone toward digital, ongoing reporting eventually.
How Cleared fits into this
Cleared already keeps a digital record of every invoice you send and every job you've been paid for, since it's all generated and stored automatically from your WhatsApp messages. That's a genuinely useful head start on the record-keeping side of MTD, even though Cleared itself isn't currently HMRC-recognised MTD software for submissions. Worth knowing where you stand on the threshold now, so it's not a scramble later.
Frequently asked questions
Do I need to worry about Making Tax Digital right now?
Only if your gross self employment income (from your last filed Self Assessment return) was over £50,000. If you're below that, you're not affected until the threshold drops to £30,000 in April 2027, or £20,000 in April 2028.
Is the threshold based on profit or turnover?
Gross income, before expenses. A sole trader with £55,000 in gross income and £30,000 in expenses is still in scope, even though their actual profit is much lower.
What happens if I don't comply once I'm in scope?
You're legally required to keep digital records and submit quarterly updates. HMRC has been writing to people it believes are affected, but the responsibility to check and comply sits with you regardless of whether a letter arrives.
Can I keep using a normal spreadsheet?
Only if it's connected to HMRC's system through bridging software that maintains the required digital links. A standalone spreadsheet with no digital connection doesn't meet the requirement.
Does this replace Self Assessment completely?
Only for those in scope. If your income is below the relevant threshold, you continue with the existing Self Assessment process as normal.