Making Tax Digital for Income Tax starts for many sole traders and landlords in April 2026. The switch is not complicated if you prepare in the right order. Use this checklist to make sure your records, software and HMRC registration are ready before the first quarterly update deadline.
The Complete MTD Readiness Checklist
1. Check your qualifying income
Your qualifying income is your self-employment income plus your UK property income. It does not include PAYE, dividends, pensions or other non-trading income. According to HMRC’s guidance on who needs to use MTD for Income Tax, qualifying income is calculated gross (before expenses).
| Tax year | Threshold | Start date |
|---|---|---|
| 2026 to 2027 | Over £50,000 | 6 April 2026 |
| 2027 to 2028 | Over £30,000 | 6 April 2027 |
| 2028 to 2029 | Over £20,000 | 6 April 2028 |
If your qualifying income is above the threshold for your year, you need to use MTD. If it is £20,000 or below, you are automatically exempt. See our MTD qualifying income thresholds guide and MTD exemptions guide for full details. Use our MTD qualifying income calculator to check whether you need to register.
How to check: Look at your most recent Self Assessment return. Add your self-employment turnover (box 3.1 on the SA103F) to your UK property income (box 1.1 on the SA105). That total is your qualifying income. Don’t subtract expenses — it’s gross income that matters for the threshold.
2. Make sure you are registered for Self Assessment
You must already be registered for Self Assessment to join MTD for Income Tax. If you are not registered, register with HMRC immediately — it can take several weeks to receive your UTR. If you’ve lost your UTR, see our lost UTR number guide.
3. Choose HMRC-compatible software
You need software that can:
- Keep digital records of income and expenses
- Submit quarterly updates to HMRC
- Submit the end-of-year final declaration
Options include:
- Full accounting software — FreeAgent, Xero, QuickBooks, Sage, Coconut, Account OS (AI accounting for UK micro-businesses)
- Spreadsheet plus bridging software — for those who want to keep their existing spreadsheet
See our cheapest MTD software for sole traders guide and our spreadsheets for MTD guide to compare options. Check that your chosen software appears on HMRC’s list of MTD-compatible software before committing.
4. Register for MTD for Income Tax
Once you have chosen software, you must register for MTD for Income Tax. This is not automatic, and you should register before the start of the tax year in which you become mandated. For the full step-by-step process, see our how to register for MTD guide.
5. Get your records into the software
Move at least one full tax year of records into your chosen software before your first quarterly update. This gives you:
- A clean starting position
- Time to catch missing transactions
- A chance to check opening balances
If you are using a spreadsheet, make sure it is structured so your bridging software can read the required totals directly. Do not retype figures — use formulas and direct imports. This is the digital links rule, and it’s the most common reason spreadsheet setups fail MTD compliance. See our can I use spreadsheets for MTD guide for the full rules.
What to move: At minimum, you need the current tax year’s transactions. Ideally, move the previous tax year too, so you can compare your opening position against your last Self Assessment return and catch any discrepancies before they become HMRC’s problem. If you’re moving from a spreadsheet, export your data as CSV and import it — most accounting software accepts CSV imports. If you’re moving from paper records, you’ll need to enter them manually, which is the most time-consuming part of the transition.
6. Connect your bank account (if available)
Many accounting packages offer bank feeds. Connecting your business account automatically imports transactions and reduces manual entry. If you use a personal account for some business spending, make sure those transactions are also captured. For the full guide on whether you need a business bank account for MTD and how to connect it, see our do I need a business bank account for MTD guide.
What to check before connecting: Verify that your bank supports open banking feeds to your chosen software. Most UK business banks do, but some smaller banks and building societies don’t. If your bank doesn’t support feeds, you’ll need to import statements manually (CSV import) — which works but is less automated. See our best business bank accounts for sole traders guide for which accounts support which software.
7. Set up your expense categories
Make sure your software can categorise the expenses you actually claim. Common categories include:
- Office costs
- Travel and vehicle expenses
- Professional fees
- Marketing and advertising
- Equipment
- Use of home as office
- Phone and internet
If you are unsure what is allowable, see our trading allowance vs expenses guide and our allowable expenses for sole traders guide.
Important: If your turnover from an income source is over £90,000, MTD requires you to categorise expenses by type in your quarterly updates. Under £90,000, three-line accounts (total income, total expenses) are sufficient for quarterly updates — but you’ll still need full categorisation for your final declaration. Set up your categories now regardless, so you’re not scrambling at year-end.
8. Review and reconcile regularly
Set a weekly or fortnightly routine to:
- Check imported bank transactions
- Categorise income and expenses
- Attach or save receipts
- Reconcile against your bank balance
The point of MTD is that records are kept up to date, not entered in a panic at year end. A weekly 15-minute reconciliation is far less painful than a quarterly 2-hour catch-up. If you let transactions pile up, the reconciliation becomes a mini-January every three months.
9. Mark the quarterly update deadlines
The quarterly updates are due by:
| Quarter ends | Update due by |
|---|---|
| 5 July | 7 August |
| 5 October | 7 November |
| 5 January | 7 February |
| 5 April | 7 May |
The final declaration and payment are still due by 31 January after the tax year ends. Put these dates in your calendar with reminders, and see our MTD quarterly updates guide for how to submit each one.
10. Submit a practice update (if possible)
If your software and HMRC registration are live before your mandate date, submit a test or early quarterly update. This confirms the connection works and gives you confidence before the real deadline. There are no penalties for late quarterly updates in 2026 to 2027, but getting into the rhythm early is still wise.
11. Decide who files — you or your accountant
You can file MTD quarterly updates and the final declaration yourself, or authorise an accountant or tax agent to do it on your behalf. If you use an accountant, make sure they are MTD-ready and have access to your software. For help deciding whether you need an accountant, see our should I hire an accountant guide.
12. Keep your login details safe
You will need your Government Gateway ID, password and MTD authorisation details. Keep them in a secure password manager and make sure you know how to recover access if you are locked out. See our locked out of Government Gateway guide if you lose access.
Common MTD Preparation Mistakes
These are the errors that catch people out during the transition:
-
Leaving it until the last minute. Moving a year of records into new software takes longer than people expect. Start at least three months before your mandate date — six months if your records are paper-based.
-
Choosing software before checking bank compatibility. Not all banks feed into all software. Check the connection works before you commit to either, or you’ll be manually importing statements. See our do I need a business bank account for MTD guide.
-
Not moving enough historical records. If you only move the current quarter’s data, you can’t verify your opening position against your last Self Assessment return. Move at least one full tax year so you can cross-check.
-
Forgetting that MTD registration is separate from Self Assessment. Being registered for Self Assessment doesn’t automatically register you for MTD. You must sign up separately through HMRC’s online service. See our how to register for MTD guide.
-
Ignoring the digital links rule with spreadsheets. If you use a spreadsheet with bridging software, the totals must flow by formula or import — not by retyping. This is the most common reason spreadsheet setups fail an HMRC compliance check. See our can I use spreadsheets for MTD guide.
-
Not setting up expense categories early. If your turnover is over £90,000, you need categorised expenses in your quarterly updates. Setting up categories after the first quarter means recategorising everything retroactively.
Quick-Start Timeline
Three to six months before your start date
- Calculate your qualifying income
- Choose compatible software
- Register for MTD
- Move records into the software
One month before the tax year starts
- Connect bank feeds
- Set up expense categories
- Add quarterly update deadlines to your calendar
- Decide if your accountant will file on your behalf
During the tax year
- Reconcile transactions weekly or fortnightly
- Submit quarterly updates by the 7th of the following month
- Review the tax estimate shown in your software
After the tax year ends
- Submit your final declaration by 31 January
- Pay any balancing payment and Payments on Account by the usual dates
Worked timeline example: A sole trader with £65,000 qualifying income, mandated from 6 April 2026, starts preparing in January 2026. January: checks qualifying income, chooses FreeAgent, registers for MTD. February: moves 2025/26 records into FreeAgent, connects bank feed. March: sets up expense categories, submits a practice quarterly update. April: first real quarterly update period begins. August: first real quarterly update due by 7 August 2026. Total preparation time: 3 months, with no January panic.
The Bottom Line
MTD is mostly a change to your admin routine, not your tax bill. If you start preparing three to six months early, the transition is straightforward. The two most important steps are choosing software that fits your business and getting into the habit of recording transactions as they happen. The most common mistake is leaving it too late — moving records into new software under deadline pressure is how errors happen.
For the complete end-to-end filing walkthrough, see our how to file MTD guide. For the complete MTD overview, see our Making Tax Digital guide. For threshold details, see MTD qualifying income thresholds. For the full jargon buster, see our HMRC jargon buster.