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Navigating the first year of Making Tax Digital for Income Tax
Discover what Making Tax Digital (MTD) for Income Tax means for you. Understand what’s changing, who needs to join and when - plus how we can help you prepare and stay compliant.
Read time: 7 mins Added: 30/01/26
Quick links: In this guide
What is Making Tax Digital for Income Tax?
What you’ll need to do
Be ready for Making Tax Digital for Income Tax with Lloyds
New to Lloyds?
Join the 1 million businesses already banking with us. Apply for a Business Account online in minutes and:
- access the new accounting tool for free
- pay no account fee for a year (if it’s your first account with us) - then £8.50 a month
- get an instant decision on lending.**
*The tool is available to sole traders and landlords registered as sole traders.
**Any lending decision is based on your financial information and our credit checks. No outcome is guaranteed.
Explaining MTD qualifying income and key dates
HMRC is introducing Making Tax Digital for Income Tax in phases, based on your qualifying income – that’s your total gross income (before deducting expenses or taxes) from self‑employment and/or property added together. Other income types, for example PAYE employment, dividends, and pensions do not count towards the thresholds.
What counts as qualifying income?
Not sure you’re in scope? We’ve put together some examples of how Making Tax Digital applies to self-employed businesses.
MTD quarterly reporting dates for Income Tax
View the key date timelines to find out when you need to start reporting your quarterly income to HMRC.
If your qualifying income for the 2024/25 tax year was over £50,000, the rules would apply to you from 6 April 2026. From then, you’ll need to keep your digital records in compatible software and send quarterly updates to HMRC. The standard deadlines for quarterly updates are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027.
Note: your 2025/26 Self Assessment tax return is due on 31 January 2027, and it should be completed under the existing Self Assessment process through HMRC online services. Making Tax Digital for Income Tax doesn’t apply to earlier tax years, which means the 2025/26 tax return (the tax year that ended on 5 April 2026) sits outside the new rules.
Check the timeline for what the key dates will look like if you start using Making Tax Digital for Income Tax from 6 April 2026.
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MTD for Income Tax timeline Date
Event
Date
6 April 2026
Event
When you must start keeping records using MTD for Income Tax software
Date
7 August 2026
Event
Deadline to send your first quarterly update
Date
7 November 2026
Event
Deadline to send your second quarterly update
Date
31 January 2027
Event
Deadline to submit a Self Assessment tax return the usual way for 2025 to 2026
Date
7 February 2027
Event
Deadline to send your third quarterly update
Date
7 May 2027
Event
Deadline to send your fourth quarterly update
Date
7 August 2027
Event
Deadline to send your first quarterly update for 2027 to 2028
Date
7 November 2027
Event
Deadline to send your second quarterly update
Date
31 January 2028
Event
Deadline to submit your tax return straight from MTD for Income Tax software for 2026 to 2027
Date
7 February 2028
Event
Deadline to send your third quarterly update
Date
7 May 2028
Event
Deadline to send your fourth quarterly update
Setting up as a sole trader before your MTD start date
If you're self-employed and earning over £50,000 a year, Making Tax Digital for Income Tax applies to you from April 2026. If your income is over £30,000, you'll need to be ready by April 2027. So even if your business doesn’t come under the new rules now, it might do next year.
Before you decide to set up as a sole trader, make sure it’s the right thing for your business - and check with HMRC if you need to register for MTD ITSA. Before you can sign up for MTD, you need to be registered as a sole trader with HMRC. If you're currently working freelance without a formal business structure, that's the place to start.
Registering as a sole trader is straightforward. You'll need to:
Before you decide to set up as a sole trader, make sure it’s the right thing for your business - and check with HMRC if you need to register for MTD ITSA. Before you can sign up for MTD, you need to be registered as a sole trader with HMRC. If you're currently working freelance without a formal business structure, that's the place to start.
Registering as a sole trader is straightforward. You'll need to:
- register for Self Assessment with HMRC if you haven't already
- choose a business name, or trade under your own name
- start keeping records of your business income and expenses.
Once you're registered, the next step is getting your finances and software in place. A Lloyds Business Account takes care of both. It includes the software you'll need when your business comes under the new MTD ITSA rules, so you won’t need to look for new tools or pay extra to stay compliant.
Keeping your business and personal finances separate also makes a practical difference. MTD requires you to report your qualifying income every quarter, and a dedicated Business Account makes that much easier. You’ll have cleaner records, less admin at each deadline, and a clearer picture of your finances year-round.
How to prepare for Making Tax Digital for Income Tax?
- Understand the rules and timing. Confirm if and when you’ll need to start using Making Tax Digital for Income Tax based on your qualifying income and what you’ll do differently.
- Pick compatible software. Find software that works with HMRC’s Making Tax Digital for Income Tax service. You must be able to keep digital records of your income and expenses, send quarterly updates and submit your tax return by 31 January the following year.
- Separate business and personal transactions. If you currently run your business through a personal bank account, consider opening a separate business account before your Making Tax Digital for Income Tax start date. That way, all your business transactions will be in one place, making your records tidy for quarterly updates and tax return.
Got a Lloyds Business Account?
If your business comes under the new HMRC rules, you can access the built‑in Making Tax Digital for Income Tax accounting tool at no extra cost. Get started with your new accounting tool