Before You Start Making Tax Digital for Income Tax: 5 Things to Check

Reviewed: 26 October 2026

Making Tax Digital for Income Tax changes how sole traders and landlords keep records and send information to HMRC. Before you choose software, check 5 things: when the rules apply to you, which accounting method you use, which update periods match your year, how much categorisation you need, and what must be ready before your first quarter.

Not everyone who works for themselves is a sole trader. Other forms of self-employment are outside these rules for now. This guide is general information, not individual tax advice. If your position is unusual, use HMRC’s checker or ask a qualified tax adviser.

1. Check whether MTD for Income Tax applies to you, and when

Making Tax Digital for Income Tax applies if you are registered for Self Assessment as a sole trader or landlord, receive self-employment or property income, and your qualifying income is over the relevant threshold. Qualifying income is the total income from self-employment and property before expenses. You must also have submitted a tax return in the last 2 years before signing up.

HMRC checks your tax return and should write to you if you are over the threshold, but you are still responsible for checking. Use the official HMRC guidance and checker for your own start date.

2. Use the accounting method that matches your records

Cash basis records income when you receive the money and expenses when you pay the bill. Traditional accounting records them by the date you invoiced or were billed.

The difference is the date that counts. An invoice sent on 28 March and paid on 10 April belongs to March under traditional accounting, but April under cash basis. HMRC explains both methods here. If you are unsure which method you already use, check your last tax return or ask your accountant before setting up your software.

3. Match your update periods to your accounting period

Standard update periods are the default and run with the tax year, from 6 April to 5 April. You should use calendar update periods, which run from 1 April to 31 March, when your accounting period ends on 31 March.

The deadlines are the same for both: 7 August, 7 November, 7 February and 7 May. Choose calendar periods in your software before you send your first quarterly update. After you send one, you cannot change the period type for the rest of that tax year. See HMRC’s period tables and deadlines.

4. Know how much categorisation you need

A digital record normally needs an amount, a date and a category. The category depends on the income source. Self-employment records use business categories such as turnover, travel and office costs. Property records use property categories such as rent, repairs and finance costs. An invoice paid by a customer, a train ticket, a software subscription, monthly rent and a plumbing repair do not all go into the same bucket.

HMRC allows simpler categorisation when turnover from a self-employment or UK property source is below £90,000. A sole trader below that threshold can record whether a transaction is income or an expense. A UK residential landlord below the threshold must also identify restricted finance costs. If the source reaches £90,000, you need full categories from the start of the current tax year before you can send the update.

Use HMRC’s full category tables when you need the complete list. Our digital records guide shows what the records look like in practice.

5. Get these 5 things ready before your first quarter

Once the choices above are clear, the setup is a short list:

1. Confirm your start date. Use HMRC’s checker rather than guessing from this year’s income.
2. Choose compatible software and authorise it with HMRC. The software must keep digital records and send quarterly updates.
3. Confirm cash basis or traditional accounting. The method decides which date counts.
4. Confirm standard or calendar periods. Set calendar periods before your first update if your accounting period runs from 1 April to 31 March.
5. Start digital records on the right date. Start on 6 April if your accounting period ends on 5 April, or on 1 April if it ends on 31 March. Keep each business or property income source separate.

A quarterly update is a summary of category totals, not a tax return. HMRC does not receive each invoice or receipt in the update. You still need to submit your annual tax return using compatible filing software, or ask your accountant to handle it. Keep the supporting documents you normally keep for Self Assessment. HMRC explains the record-keeping rules here.

You should not have to buy a whole accounting system to send HMRC 4 sets of totals a year. The useful software is the one that makes the records part of work you already do.

EasyInvoice handles the work you do throughout the year: invoices, MTD digital records, other income and expenses, and quarterly updates for UK sole traders and UK property landlords. An invoice you already need to send becomes part of your MTD records instead of something you copy into a second system.

Recognised by HMRC for Making Tax Digital for Income Tax. Software ID: ZY9GJZ.