With less than three months until the first quarterly filing deadline for Making Tax Digital for Income Tax on 7 August, tax expert Andy Levett, principal at HW Fisher, provides tips and advice on what factors to consider.
The long awaited Making Tax Digital (MTD) for Income Tax has finally arrived. From April 2026, sole traders and landlords with gross income above £50,000 are in scope. For many, the question has moved on from ‘what is MTD?’ to something more practical: what software do I need, and how do I select the right one for me?
The answer to these questions largely hinges on how you currently handle your finances, but most people have more options available to them than they realise.
The £50,000 threshold is based on 2024-25 turnover, not current-year income. It drops to £30,000 in 2027 and £20,000 in 2028, so even those who are not yet in scope will be before long.
It must be made clear that the 2025-26 self assessment tax return, due 31 January 2027, must be filed under the current system. The date that actually matters is 7 August 2026, the due date for the first quarterly submission for the period 6 April 2026 – 5 July 2026.
HMRC requires digital record-keeping and quarterly submissions, but it does not detail how you get there. All software must appear on HMRC’s approved list, but within that the options broadly fall into three categories.
Cloud accounting
Cloud accounting platforms such as FreeAgent, Xero, QuickBooks, Sage, and ClearBooks are able to handle the whole process in one place: record-keeping, quarterly submissions, and the annual final declaration, and most have the ability to import relevant transactions directly from bank accounts.
They are the most comprehensive option and the most useful if your accountant is closely involved as advisers can access records in real time, which reduces the year-end scramble considerably. Landlords with overseas property should check compatibility before committing, as not all platforms handle foreign income.
Bridging software
For those who already keep organised records in Excel or Google Sheets and have no particular desire to change, bridging software is worth considering. It sits between your spreadsheet and HMRC, handling the submission without touching how you work.
The process is simple: authorise with your Government Gateway login, map the relevant cells and submit. It typically takes under 10 minutes per quarter. The important caveat is that bridging software submits whatever is in your spreadsheet, so accuracy is the user’s responsibility.
Submissions are also cumulative, so each quarterly filing includes data from earlier in the year, either confirming or adjusting those figures.
It may not be a permanent solution as HMRC’s systems develop, but it is perfectly adequate for now and often the most cost-effective route for straightforward finances.
Bank-integrated solutions
A third option has emerged more recently: bank-integrated solutions from challenger banks such as Starling and Monzo, which build MTD compliance directly into your current account. These appeal to those who want everything in one place, however they do have some limitations as these are not fully end-to-end and the final declaration still needs to be filed separately. This market is still growing and larger banks may follow, but it remains early-stage for now.
NatWest and RBS customers can access FreeAgent at no extra cost through their business banking, while Monzo, HSBC and Starling Bank also have free MTD products for business account holders.
The right choice follows fairly naturally from how you already work. If your records are tidy and held in a spreadsheet, bridging software is probably the simplest and cheapest route.
If your finances are more complex, with multiple income streams, VAT or overseas property, a full cloud accounting platform will give you more control and reduce the risk of errors. If you want your accountant involved throughout the year rather than just at year-end, a cloud platform makes that straightforward.
Most providers offer free trials. It is worth spending time with one before committing. The HMRC software finder tool is the best starting point for finding approved options.
The penalty regime is points-based. Each missed quarterly submission earns one point and four points triggers a £200 fine. Failing to maintain digital records at all carries a penalty of up to £3,000.
HMRC has confirmed there will be no quarterly filing penalties during the first year up to 5 April 2027, a grace period for those still finding their feet, but that is not a reason to leave things until the last minute.
On payments, it is worth noting that there are no quarterly payment obligations under MTD. The annual payment deadlines for income tax and Class 4 National Insurance remain 31 January and 31 July, so for the 2026-27 tax year, the balancing payment and first payment on account are due 31 January 2028, and the second payment on account by 31 July 2028.
The quarterly submission rhythm does not change when you pay. Late payment penalties will now apply on a sliding scale from 31 January: 3% of the amount outstanding on day 15, a further 3% on day 30, and 10% per annum from day 31 onwards.
It is tempting to leave the MTD transition entirely to your accountant, but the quarterly rhythm means more regular contact than a once-a-year return, and that has implications for cost and process. It is worth an early conversation about how that arrangement would work in practice before Friday 7 August arrives.
This article was first published in Business and Accounting Daily on 14 May 2026. View on their site.
Making Tax Digital for Income Tax Hub page
Making Tax Digital for Income Tax: Considerations for landlords
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