Making Tax Digital: A guide for agents

Do all my clients need to use MTD?

No. Only clients with qualifying income - self employment and/or property letting income – above the relevant thresholds will be affected.

Discover who needs to use MTD

Clients who would not need to use MTD include:

• Clients without any self employment or property income from letting.
• Clients with self employment income and/or property income under £20,000.
• Clients with a digital exclusion exemption (must be applied for).
• Clients who are not mentally or physically capable and have either given power of attorney for someone to act on their behalf or had a deputy appointed by a court to act on their behalf.
• Clients in their capacity as a representative for someone who has died (they must still consider MTD separately for their personal income).
• Clients that are companies or partnerships.

This list is not exhaustive. Get more information about exemptions.

Your client can also voluntarily sign up for MTD if they have qualifying income but are not yet required to use it.

When do my clients need to start using MTD?

The start date depends on their qualifying income:

• For qualifying income more than £50,000 for 2024/25, MTD applies from 6 April 2026.
• For qualifying income more than £30,000 for 2025/26, MTD applies from 6 April 2027.
• Under current government plans, for qualifying income over £20,000 for 2026/27, MTD applies 6 April 2028.

What does using MTD mean?

If your client needs to use MTD, they must:

• Keep digital records of their self-employment and/or property income.
• Submit quarterly (real time) updates from those digital records.
• Submit their annual tax return through the MTD system.

They cannot use HMRC’s online services to submit their Self Assessment if they are required to use MTD.

HMRC does not provide an online service or software for MTD – you must use compatible third-party software.

Software

What type of software do I need to be able to use MTD for my clients?

There are two types of software solutions you can choose either a:

1. Full software solution: Creates and maintains the digital records and submits directly to HMRC.
2. Bridging solution: Allows you to connect to your own software (e.g. spreadsheets) where you create your digital records and connect them to HMRC for submission.

If you use a bridging software or multiple software products, you must ensure:

• They are MTD-compatible and can all work together.
• The software used to keep/create records and the software you use to submit to HMRC are digitally linked.

The digital links need to be in place before you start submitting quarterly updates or the tax return.

Digital links are only required for qualifying income/expenses (e.g. property income/expenses and income/expenses from self-employment). Links can range from spreadsheets formulas to automated data transfers.

You must also ensure your software can handle all the information that will be on the annual tax return, not just qualifying income. For example, if you use software that creates digital records of property income and self-employment income, it must also be capable of reporting any other types of income required for the tax return.

HMRC has a tool that helps you find the best option.

Is free or low-cost software available for MTD?

Yes, there are free and low-cost software options available, but you should consider any restrictions that the software may have.

HMRC has more information on both the software tool mentioned above and a list of recognised software solutions.

Digital records

What information needs to be in the digital records?

The digital records for MTD need to show the income and expenses of self-employment and property letting income. The digital records need to be kept for each income source, so a client with both property income and income from self-employment needs to keep separate digital records for both income sources. This will provide the information for the quarterly updates – you’ll need one quarterly update for self-employment income and another quarterly update for property income.

Your client may have other income, such as savings, employment or dividend income, but you don’t include this in the digital records for MTD. However, the software you use must be capable of including other types of income/expenses for the annual tax return. Your client must continue to keep records of their other types of income and expenses for the year.

The digital records of income or expenses need to include the:

• Amount
• Date when the income was received or expenses incurred
• Category (this depends on the type of business)

MTD uses the same categories of income and expenses as Self Assessment. HMRC have further guidance on this, including information on digital links.

Are there any simplification measures for the digital records?

There are some simplification measures for joint landlords, retailers and where the turnover is below the VAT threshold.

Joint landlords

Each joint landlord must report their own property income and must do so through MTD, if required. However, complications can arise where only one landlord keeps records of expenses, making it difficult to create digital records of each share of the expense.

To help with this, joint landlords can make use of various easements which allow fewer digital records to be created. Joint landlords can choose to only create digital records of their income (and not expenses) and/or to only create a digital record for the total of the income for each quarter.

This would mean instead of creating three digital records for each month’s rent, a single digital record can be created for the total of the three months’ rent. Expenses must be reported annually.

Retailers

Retailers can create digital records based on daily gross takings rather than individual sales.

Turnover below VAT threshold

If the turnover is below the VAT threshold for UK property income or self-employment, you may be able to use simpler categorisation for the digital records.

This allows amounts to be categorised only as expense or income, without needing any further categorisation.

If your client is a landlord with residential property finance costs (e.g. mortgage interest), this must be categorised separately.

The VAT threshold is applied per income source, not combined.

If you have a client with both self-employment and property income, it will be possible to use the simplified categorisation if both are below the VAT threshold when considered separately (i.e. you do not add them together).

Example

John has the following income sources:

Income from self-employment	£87,000
Income from UK property letting	£65,000

Although John’s total income for the year is £152,000, the rules apply per income source. Since his income from self-employment is below the VAT threshold and his income from UK property is below the VAT threshold, he can use simpler categorisation for both income sources.

If your client were to exceed the VAT threshold during the year, the digital records would need to be categorised in full for the entire year before you can send the next quarterly update.

Can I use a bank feed to create the digital records?

Yes, you can use software that connects to your bank account to create digital records. Care should be taken as the information may need to be manually created or adjusted, depending on what information is in the bank feed.

What if I need to correct a digital record?

If you need to make a correction during the tax year, the corrected digital record will be included in the next quarterly updates.

If you are using software that creates the digital records, simply correct it in the software.

If you are using a bridging software solution, you correct the record (e.g. in a spreadsheet) and digitally link it to your software that submits the returns to HMRC.

If you need to make a correction after you’ve submitted your fourth quarterly update, you can either correct the digital record and resend the quarterly update or adjust the category total.

Correcting the digital record may be more difficult depending on whether your client keeps their own digital records or you, as agent, are maintaining these. If you must adjust the total, then you need to tell the client to update their digital records if they are preparing these.

Are digital records the only records our clients need to keep?

Your clients should continue to keep regular records for self-assessment as well as digital records.

Digital records need to be kept for at least 5 years after 31 January submission deadline for the tax return, which is the same requirement for self-assessment record keeping.

Quarterly updates

What information needs to be in the quarterly updates?

The quarterly updates are created from the digital records, so only contain information on self-employment and property income and expenses.

There’s no need to include other types of income like dividend, savings etc. You’ll need to make a quarterly update for self-employment and a separate quarterly update for property income.

Quarterly updates are not tax returns. They won’t show any reliefs or adjustments for tax/accounting and there is no tax payment due with the quarterly update.

You will, however, be able to see an estimated tax liability on the client’s account each time a quarterly update is sent. This is based only on the information in the quarterly updates, so doesn’t include tax or accounting adjustments, reliefs or any other sources of income.

The software you use will add all the digital records together to form the quarterly update information. HMRC won’t see the individual records making up the quarterly update, just a total.

It’s a cumulative record, so your fourth quarterly update will show all the information for the year in your digital records.

If you make a correction to a digital record, this will be included in your next quarterly update, so long as the correction is within the tax year.

What are the quarterly update submission deadlines?

The quarterly updates sent to HMRC every 3 months and include the totals of your digital records.

The deadline will always be the same but the information you report depends on what update period is used. This can either be a standard period (aligning to tax year) or calendar period (ending on last day of the month).

Tax year

Update period	Update deadline
6 April to 5 July	7 August
6 April to 5 October	7 November
6 April to 5 January	7 February
6 April to 5 April	7 May

Calendar year

Update period	Update deadline
1 April to 30 June	7 August
1 April to 30 September	7 November
1 April to 31 December	7 February
1 April to 31 March	7 May

You should ensure that your software supports calendar year updates if you want to use this. You need to actively choose the calendar year option in the software you use before the first quarterly update is made. Once you select, you will need to use that update period for the full tax year.

Are quarterly updates sent automatically to HMRC?

No. You’ll need to make the submissions by the deadlines above through your compatible software.

If you’re late submitting a quarterly update, then penalties will apply. HMRC has relaxed the rules for the first 12 months of MTD if your client is required to use it from 6 April 2026. This means that no penalty points will apply for late quarterly updates but will still apply to late submitted tax returns.

If your client isn’t required to use MTD until 6 April 2027, the normal penalty rules apply.

Learn more about quarterly updates

What if my client has more than one sole trade business?

You need to keep digital records for each source of income. If your client has more than one sole trade business, you must keep records of each business. A quarterly update will be required for each sole trade business.

You should consider the software requirements in this case. It may be that additional software or licence is required to maintain two sets of digital records (or more).

What if my client is both a joint and sole landlord of different properties?

If your client has both properties in their own name and others that are owned jointly, they need to make quarterly updates for all the properties that make up their property income. This will be one quarterly update for all UK property income, adding together all the digital records created.

There are certain simplifications for joint landlords, so the records for the jointly owned properties may be simplified but this does not apply to solely owned properties.

If your client owns foreign properties, this will be a separate submission to any UK property income.

Does the accrual basis work under MTD?

Yes. You can use the accrual basis or cash basis under MTD, but it is advised to maintain consistency throughout the year.

How do you submit the tax return when using MTD?

The tax return will be submitted using the software you have been using for quarterly updates.

After the last quarterly updated is submitted on 7 May, you’ll be able to adjust the data for any tax or accounting adjustments, claim reliefs or allowances and perform your usual yearend procedures.

You’ll also need to add any additional sources of income to the tax return.

Some of this information will be pre-populated by HMRC, such as:

• Employment (PAYE) income
• Student loan repayments
• Income from state, private and occupational pensions
• Other taxable state benefits
• Construction Industry Scheme (CIS) — subcontractor deductions
• Capital Gains Tax residential property disposals
• Marriage Allowance claims

Other sources of income such as savings, dividends and partnership profit share will need to be added manually. It’s important to include all information for the tax year, even if HMRC should have pre-populated it and did not.

The tax return submission deadline remains the same, so the tax return for 2026/27 will need to be filed by 31 January 2028.

MTD only applies from tax year 2026/27 onwards, so you must file the clients tax return for 2025/26 through the HMRC online services platform.

My client needs to start using MTD, what should I do now?

You must make sure that you have followed all the steps for signing up to MTD.

This includes:

• Obtaining authorisation from your client.
• Create an agents services account agent services account if you don’t already have one – the agent services account is different from the HMRC online service for agents account.
• Making sure you have appropriate software in place that is compatible with MTD.
• Sign up client for MTD.

If you already have authorisation from your client through self-assessment, this will be recognised for MTD. You can check your agent services account to see if the authorisation is shown. If it is not, you need to add it.

Authorisations will not automatically sign your client up for MTD. You’ll need to do this separately once the authorisation is shown on your account.

If you have used a digital handshake, you can sign up your client for MTD without having to add the authorisation to your agent services account.

Some agents have been using the testing service for MTD and may already be familiar with how the process will work. However, there are still some things you should think about at the start of the tax year:

• Verifying who is the main agent for your clients – if there are multiple agents for a client, then only the main agent can submit a tax return.
• Verifying who is preparing digital records or quarterly returns (you, a client or a supporting agent) and how you will check this information and correct it if necessary.
• Confirm the software you are using can make tax return submissions. For those who have been part of the MTD testing, this may be overlooked as a functionality requirement.
• Consider each clients income sources and whether any special rules apply.
• Check whether any exemptions apply and if you need to make an application or they are automatic.
• Confirm whether the client has one or multiple income sources for MTD reporting and the impact on the digital record and reporting obligations.
• Consider the VAT thresholds for each income source – is it possible the threshold may be breached during the year? If so, is it preferable to categorise in full rather than make use of the simplification.
• Confirm where the information for any income not being submitted via MTD is being recorded and if this will be easily available for the tax return at year end.
• Confirm whether your client will use cash accounting or accruals basis.
• Decide whether to use calendar year update periods or tax year update periods for the quarterly updates (make necessary choice in software).
• Consider whether the software you are using is sufficient – does it link to any additional software products needed and can it handle all the income sources.
• Consider the long term outlook for your client – do you expect them to continue using MTD, become liable for MTD in future or do you believe their income sources will cease (get more information on who MTD applies to and scenarios where income reduces or ceases).
• Consider your client portfolio as a whole and enact processes for similar client types to streamline your operations.