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Making Tax Digital for Income Tax: How It Works and Who It AffectsWritten on April 28, 2026 by Kirk Rice LLP

If you’ve heard about Making Tax Digital (MTD) but aren’t quite sure what it means for you — or how your tax return gets to HMRC under this new system — you’re not alone.
In this guide, we’ll explain what MTD is, who it applies to, and how your accounting software links to HMRC, all in clear, plain English.

What is Making Tax Digital (MTD)?

Making Tax Digital is a government plan to modernise the tax system by moving away from paper-based processes. It means you’ll need to:

• Keep digital tax records
• Use compatible software
• Send updates to HMRC online

It’s being rolled out gradually, and different types of taxpayers will join at different times.

Who Does Making Tax Digital Apply to and By When?

Whether you need to comply with MTD depends on your situation:

• Self-employed individuals and people with property income where total gross income is over £50,000 — Must join MTD for Income Tax from April 2026 (unless you are non-UK resident – your start date will be April 2027).
• Those with gross income from the above sources over £30,000 — Will follow from April 2027.
• Those with gross income from the above sources over £20,000 — Will follow from April 2028.

You can check your position on HMRC’s official MTD page.

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What Are The Requirements Under MTD?

With MTD, you no longer manually manipulate your accounting figures. Instead, you must:

• Use MTD-approved accounting software (like Xero, QuickBooks, or Sage).
• Keep digital records of your income and expenses from self-employment and property sources in that software.
• Send quarterly updates via the software.
• Submit a final declaration of your other income sources, capital gains and tax relievable investments in place of the self-assessment tax return.

The software communicates with HMRC through a secure digital link in the background, confirming your submissions have arrived safely.

How Does Your Accounting Software Connect to HMRC?

If you’re not a tech expert — don’t worry. The software handles all the tricky parts for you. Here’s how it works in practice:

• Sign up for MTD on the HMRC website and wait for confirmation.
• Choose a compatible software package that suits your needs.
• Connect your software to HMRC by logging in with your Government Gateway details when prompted and giving permission. It’s a login-and-click process.
• Send quarterly accounting updates through your software — and receive confirmation when they’re sent.

We at Kirk Rice will be happy to help you choose the right software, and to undertake either the quarterly update submission, or the final declaration work (or both) on your behalf. If you are an existing client of our firm, we will be in touch to discuss this where we believe you will be affected.

Is It Secure?

Yes — all information is encrypted, and only recognised software can send data to HMRC under MTD.

What Does This Mean for Businesses, Landlords, and Self-Employed People?

The benefits of Making Tax Digital include:

• Fewer tax errors
• Clearer visibility of your tax position throughout the year
• Less paperwork and admin at year-end

If you’re affected by the upcoming MTD for Income Tax rules, it’s a good idea to get familiar with digital record-keeping and compatible software now.

Making Tax Digital is reshaping the UK tax system by requiring businesses, landlords, and sole traders to keep digital records and use software to submit tax returns directly to HMRC. The good news is — your software handles the secure connection for you, with no technical skills needed.

If you’d like advice on getting MTD-ready or choosing the right software for your business, we’re here to help — get in touch today via info@kirkrice.co.uk

Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. The FCA does not regulate tax and trust advice.