So What Even Is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's plan to modernise the tax system — moving from annual tax returns to a digital-first approach where income and expenses are reported quarterly.
If you're a sole trader, landlord, or freelancer, (or work for yourself in some capacity even as a side hustle) you'll soon need to use MTD for Income Tax. Instead of one annual tax return, you'll send HMRC quarterly updates and an end-of-period statement at the end of the tax year.
Instead of one big admin push at tax time, you'll be submitting 4 quarterly returns (updates) per year - per type of income. It might sound like more admin, but with the right software (hello, Otis 👋), it's much simpler in practice — you'll just record your income and expenses as you go, and Otis handles the rest.
How it works in practice
1️⃣ Sole trader only
Let's say you run your own business as a graphic designer. Under MTD, you'll send HMRC:
- 4 quarterly updates — quick summaries of your business income and expenses for each quarter.
- At the end of the tax year, you'll review everything and send an End of Period Statement (EOPS) confirming your figures.
- Finally, submit one Final Declaration — replacing your old Self Assessment return, confirming any other income such as employment, savings, or dividends.
With Otis, those quarterly updates are largely automatic — you just record as you go, and Otis reminds you when it's time to send an update. Plus when it comes to the End Of Period Statement and Final Declaration, these can be done in as little as than 3 clicks of a button.
2️⃣ Sole trader + landlord
If you run your own business and rent out a property, you'll have two income sources under MTD. That means:
- Two sets of quarterly updates — one for self-employed income, one for property income.
- Two End of Period Statements — one per source at the end of the tax year.
- A single Final Declaration to tie everything together and confirm your total taxable income.
It might sound like a lot, but Otis keeps both income streams organised — with clear dashboards for "Business" and "Property," and reminders when each update is due, with just an extra click for that end of period statement.
3️⃣ Two (or more) self-employed businesses
If you have more than one business — say, you're a plumber during the week and run an online shop on weekends — HMRC sees these as separate businesses, each with its own MTD obligations.
- 4 quarterly updates per business.
- An End of Period Statement for each one.
- A single Final Declaration to wrap it all up.
Again, Otis makes this painless — connect each business once, record income and expenses under the right heading, and Otis handles the quarterly submissions automatically.
Ok So Now What Do You Need to Do and Are You Affected?
You're affected if your total income from self-employment and/or property exceeds:
- £50,000 from 6 April 2026
- £30,000 from 6 April 2027
These thresholds apply separately to each income source. So if you have both self-employment and rental income, you'll need to sign up for MTD for each one that meets the threshold.
If you are not sure HMRC will be sending a few letters out to those taxpayers that will fall under the tax regime, the first set being sent out in November 2025 and the second set sent after the end of the tax season in January 2026. But (big but) it's ultimately your responsibility to check if and when they need to use MTD for Income Tax, and make sure you are signed up and prepared to use it when you need to.
How to Sign Up for MTD for Income Tax
HMRC's sign-up process is straightforward — but pay attention if you have multiple income sources. You'll need to sign up for each one separately.
Important note from HMRC:
If you have multiple sources of qualifying income (for instance, you are a sole trader and also a landlord, or have two self-employed businesses), you must sign up for MTD for all your income sources at the same time — completing a separate application for each one.
- Go to HMRC's sign-up page and check your eligibility.
- Have your Government Gateway user ID and password ready.
- Provide your business or property income details.
- HMRC will confirm when you've successfully joined MTD for Income Tax.
Can I Still Use Spreadsheets for MTD?
Yes — you can still use spreadsheets for Making Tax Digital, as long as they're API-enabled and meet HMRC's digital linking requirements.
This means your spreadsheet must link directly to HMRC using bridging software, rather than copying and pasting data. Bridging software connects your spreadsheet records to HMRC's systems and submits your quarterly updates automatically.
You can even use Otis alongside your existing spreadsheets — Otis supports API-enabled digital record-keeping and can submit your MTD updates directly to HMRC.
While spreadsheets remain acceptable, HMRC has signalled that as MTD expands, maintaining compliance using spreadsheets will become increasingly complex.
Cloud-based MTD software like Otis offers a simpler, safer, and more future-proof solution.
Get Extra Help If You Need It
HMRC have actually put together some useful resources to help you get your head around it all.
You can register to join a live webinar or watch a recording to help you get ready. Go to GOV.UK and search 'HMRC videos and webinars for Making Tax Digital for Income Tax'.
For more guidance on the steps you need to take to prepare, go to GOV.UK and search for 'Making Tax Digital for Income Tax for sole traders and landlords: step by step'.
HMRC will be sending a few letters out to those taxpayers that will fall under the tax regime, the first set being sent out in November 2025 and the second set sent after the end of the tax season in January 2026.
Important Dates You Need to Know
6 April 2026: MTD for Income Tax becomes mandatory for individuals with income over £50,000.
6 April 2027: The threshold drops to £30,000.
You'll still file your 2025–26 tax return under the current Self Assessment system (due by 31 January 2027).
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The content included in this guide is based on our understanding of making tax digital legislation at the time of publication. It may be subject to change and may not apply to your individual circumstances. This guide should not be relied upon as tax advice — you are responsible for complying tax rules and regulation and should seek independent advice if you require further information.