Busting common myths about Making Tax Digital for Income Tax
This article was created in partnership with Sage.
Making Tax Digital for Income Tax (known as MTD for IT) is the government’s plan to modernise how sole traders and landlords keep their records and share information with HMRC. In short, it means keeping certain records digitally and sending tax information to HMRC online. If you’re not sure what this actually involves, we’re here to clear things up and help you feel more confident about what’s changing.
Before we get into it, a reminder that we can’t give you tax or financial advice. You’ll need to speak to a professional adviser for that.
“MTD means going 100% digital with all my accounting”
Not quite. MTD for Income Tax means keeping certain business records digitally and sending HMRC updates using compatible software. It doesn’t mean you have to transform every part of your accounting or abandon all the tools you already use. It’s simply about making the reporting process and record keeping more digital and joined-up.
“HMRC wants extra data from me”
It might feel that way, but the core information HMRC needs hasn’t really changed, it’s just the way it’s gathered. It’s more of a little-and-often approach, not an extra deep dive into your finances.
“MTD changes the amount of tax I pay”
MTD doesn’t change how tax is calculated; it’s about how you send the information, not what you owe.
“I use an accountant, so I can ignore MTD”
Ultimately, it’s on you to make sure your taxes are filed correctly. But if you use an accountant, they should take charge and follow the new MTD rules on your behalf – which means using software that works with MTD so your records and submissions are digital.
“MTD doesn’t apply to individuals”
It does. Some sole traders and landlords will join MTD for Income Tax from April 2026, with more phases following later. Here’s how the rollout works:
From April 2026, it applies to sole traders and landlords with total qualifying income over £50,000.
From April 2027, it expands to those with income over £30,000
From April 2028, it expands to those with income over £20,000
“MTD means no more tax returns”
Sorry, tax returns aren’t going anywhere! But they are going to be different. MTD changes how you keep your records and share information with HMRC. Rather than doing your end of year filing on HMRC’s website, you’ll do it using compatible software.
With Monzo’s free MTD software, you can file tax straight from Monzo to HMRC, ready for the new rules coming in April 2026. Apply for a free business bank account to get on the waitlist.
Only sole traders or limited company directors in the UK can apply. Ts&Cs apply.