In Part 1, we covered who needs to make quarterly submissions to HMRC under Making Tax Digital for Income Tax. In this second part, we look at the practical side of getting ready:
- the software you need,
- when to sign up,
- what information HMRC will ask for
- what penalties may still apply.
How HMRC decides whether you need to use Making Tax Digital for Income Tax
If your income is above the relevant threshold, HMRC will write to you to confirm that you need to start using Making Tax Digital for Income Tax from the beginning of the next tax year.
For example, if HMRC reviews your 2024 to 2025 Self Assessment tax return and finds that your qualifying income is over £50,000, it will write to confirm that you must start using the service from 6 April 2026.
However, even if you do not receive a letter, it is still your responsibility to check whether the rules apply to you, when you need to join, and to make sure you are prepared in time.
Quarterly submissions to HMRC must be made through compatible software
A key part of Making Tax Digital for Income Tax is that quarterly submissions must be sent using compatible software.
This means you cannot submit your quarterly updates through the old HMRC online gateway or through other manual methods. If you are affected by the new rules, you will need software that can connect with HMRC and file your information digitally.
What software you need for Making Tax Digital for Income Tax
You, or your tax agent, must use commercial software that works with Making Tax Digital for Income Tax.
Your software needs to let you:
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create, store and correct digital records for your self-employment income and expenses
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keep digital records for your property income and expenses
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send quarterly updates to HMRC
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submit your tax return by 31 January following the end of the tax year
In other words, your software should do more than basic bookkeeping. It should also help you meet your reporting obligations under HMRC’s Making Tax Digital rules.
Can you use more than one software product?
Yes. Depending on how you work, you can choose:
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one compatible software product that does everything, or
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more than one product that works together
For example, you may use one tool for record keeping and another for sending your submissions to HMRC. This may be useful if you already use software you like and only need an extra product to help with compliance.
The important point is to make sure the products work together and cover all of your Making Tax Digital for Income Tax requirements.
What to look for when choosing Making Tax Digital software
Before choosing a software product, make sure it has the features you need for your circumstances.
Your software should be able to:
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support all income sources covered by Making Tax Digital for Income Tax, including self-employment, UK property and foreign property
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let you send quarterly updates to HMRC
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allow you to submit your tax return
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include any other income sources needed to complete your return
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work with your accounting period, whether that is the standard tax year, calendar update periods or another method
Choosing the right MTD software early can save time, reduce stress and make the transition easier.
How to find the right software for Making Tax Digital for Income Tax
HMRC provides a software finder tool to help users find products that work with the new system
https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax
This tool can help you:
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find compatible software based on your needs
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check whether your existing software works with Making Tax Digital for Income Tax
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compare suitable options before you choose
If you are unsure where to begin, this is a useful place to start.
When to sign up for Making Tax Digital for Income Tax
If you need to use Making Tax Digital for Income Tax from 6 April 2026, it is best to sign up before that date so that you are fully prepared.
HMRC will check that you are eligible based on the information you provide.
You may be able to sign up:
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during the current tax year (2025 to 2026), although you would then need compatible software to send any missed quarterly updates for the year so far
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from 6 April 2026, for the 2026 to 2027 tax year
Signing up early gives you more time to get used to the software and organise your records properly.
Penalties for Making Tax Digital for Income Tax
If you are required to join Making Tax Digital for Income Tax from 6 April 2026, HMRC has said it will not apply penalty points for late quarterly updates in the first tax year, which is 2026 to 2027.
However, penalties can still apply in other areas.
You may still face penalties if:
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your tax return is submitted late
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your tax bill is paid after the deadline
So while there may be some flexibility for quarterly updates in the first year, filing and payment deadlines still matter.
What information you need to sign up
When using the sign-up service, you will need to tell HMRC about your active sole trader business and any property income.
You will need:
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your business start date, or the date you started receiving property income if this was within the last 2 tax years
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confirmation of the tax year you will begin using Making Tax Digital for Income Tax
If you are a sole trader, you will also need:
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your business name
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your business address
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the nature of your business or trade
If you have more than one self-employment business or more than one property business, you should check each one in the online service and add any missing details.
How to sign up for Making Tax Digital for Income Tax
To sign up, you will need the same HMRC user ID and password that you use for Self Assessment.
You may also be asked to prove your identity. This can usually be done by:
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using a mobile app to match your face with your passport or driving licence
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answering questions based on details HMRC already holds, such as your Self Assessment record, latest P60, recent payslip, passport, driving licence or credit reference details
Final thoughts
For many sole traders and landlords, Making Tax Digital for Income Tax is more than just another HMRC change. It affects how you keep records, how you report income, and how you prepare for tax deadlines.
The best approach is to get ahead now. Check whether the rules apply to you, choose the right software, understand when to sign up, and make sure your records are ready before the new rules begin.
Preparing early will make the move to Making Tax Digital for Income Tax much smoother.
