What Is Making Tax Digital for Income Tax, and What Changes in April?

Making Tax Digital for Income Tax: the plain-English overview

Making Tax Digital (often shortened to “MTD”) is HMRC’s long-running programme to move tax record-keeping and reporting away from paper and manual processes and toward digital records and software-based submissions. “Making Tax Digital for Income Tax” (also called “MTD for Income Tax” or “MTD for ITSA”) is the part of that programme that affects people who pay Income Tax on business or property income, such as sole traders and landlords. In practical terms, it changes how you keep your records and how often you send information to HMRC.

If you’ve been used to doing a Self Assessment tax return once a year, the shift can feel significant at first glance: instead of one big annual task, MTD for Income Tax introduces digital record-keeping and more regular updates during the year. The aim is to reduce mistakes, spread the workload, and help taxpayers stay closer to “real-time” information about how their business is performing and what tax might be due.

For many small businesses and landlords, the big question is not “What is the concept?” but “What exactly do I have to do, and what changes in April?” This guide explains the essentials, what typically changes at the start of the tax year, what you should do ahead of time, and how to make the transition straightforward using software that’s designed for the job.

Who MTD for Income Tax is for

MTD for Income Tax is designed for individuals who are within Self Assessment because they have income from self-employment (as a sole trader) and/or from property (as a landlord). That includes:

• Sole traders who run a business in their own name.

• Landlords with income from UK property (and in some cases other property income).

• Individuals with more than one source of business or property income (for example, a side business plus rental income).

If you are a limited company, you do not pay Income Tax on company profits in the same way as a sole trader. Limited companies are generally within Corporation Tax and Companies House filing requirements (accounts and confirmation statements). However, directors often still use Self Assessment for personal tax (for example, dividends and other personal income), and it’s common for business owners to have both a company and personal tax obligations. The key point is that MTD for Income Tax targets business and property income reported through Self Assessment, while companies have their own digital obligations for Corporation Tax and accounts.

What MTD for Income Tax actually requires

At its core, MTD for Income Tax introduces three practical requirements:

1) Digital records
Instead of keeping records in paper form or as a collection of manual notes, you keep your accounting records digitally. That means recording income and expenses in software as you go, rather than waiting until the end of the year to build everything in a spreadsheet or shoebox of receipts.

2) Quarterly updates
You send summary updates to HMRC more regularly during the year (generally once per quarter). These updates are not the same as a full tax return. They’re essentially periodic snapshots based on your digital records.

3) End-of-period statements and a final declaration
At the end of the tax year, you make final adjustments (the kinds of adjustments you’d normally do on a Self Assessment return, such as accounting adjustments) and submit a final declaration. This replaces the “once-a-year only” approach and wraps up the year properly.

Quarterly updates vs. a tax return: what’s the difference?

One common misunderstanding is that quarterly updates are “pay tax quarterly” or “file a full return four times a year.” In reality, quarterly updates are usually about reporting totals based on the records you’ve kept digitally. The full end-of-year process still matters, because that’s where you finalise allowances, reliefs, and adjustments.

Quarterly updates can still be valuable even if the final tax calculation happens later. They help you spot patterns early, keep your bookkeeping current, and avoid the annual panic of trying to reconstruct a year’s worth of activity at the last minute.

Why HMRC is doing this

HMRC’s goals with Making Tax Digital include reducing avoidable errors, encouraging better record-keeping, and making it easier for taxpayers to see how their business is performing. Many mistakes in Self Assessment come from missing paperwork, mis-typed figures, or rushed end-of-year calculations. When records are maintained throughout the year in software, there is less reliance on memory and fewer manual steps that can introduce errors.

For a small business owner, the practical upside is that you can treat tax compliance as part of your regular admin routine rather than an annual crisis. When you pair this approach with the right tools, you may also get better visibility into cash flow, profitability, and which expenses are rising.

What changes in April?

April is the start of the UK tax year (running from 6 April to 5 April). That means April often brings a set of “fresh-start” changes and deadlines, including new allowances, updated thresholds, and in many cases the point at which new compliance processes begin. In the context of MTD for Income Tax, April matters because:

• It aligns with the tax-year cycle. Digital record-keeping and quarterly reporting operate within the framework of tax years and quarters.

• It’s the moment your new routine begins. If you come within MTD for Income Tax from a given tax year, your first quarter starts early in the year, and how you set up your records in April influences how easy everything else is.

• It’s when you should reset your bookkeeping system. Categories, VAT settings (if applicable), invoice templates, and expense tracking should be reviewed at the start of the year to avoid messy rework later.

Even if you are already comfortable with digital records, April is a great time to ensure your system is configured for the way you actually trade, so your quarterly updates become a simple “review and submit” task rather than a complex reconciliation.

The practical impact for sole traders

If you’re a sole trader, MTD for Income Tax encourages a tighter loop between the work you do and the financial record you keep. You’ll typically feel the impact in three areas:

1) Invoicing becomes part of compliance
When you create invoices through software and log payments properly, your income record is effectively built for you. That’s why using an invoicing tool that also supports the digital record-keeping workflow is such a big advantage.

2) Expenses need consistent categorisation
Under a once-a-year approach, you might have tolerated loosely organised receipts and then sorted them at year end. Under MTD, it’s more efficient to record expenses as they happen, in categories that match how you report your accounts.

3) Quarterly rhythm replaces annual scramble
A quarterly cadence means you review records more frequently. This can be a positive change: less stress, fewer surprises, and better visibility into how the business is doing.

The practical impact for landlords

Landlords often have fewer transactions than a retail or service business, but the rules still matter. Rental income, letting agent fees, repairs, insurance, and finance costs can all need careful handling. Under MTD for Income Tax, landlords are encouraged to maintain digital records of rent received and allowable expenses throughout the year, then send quarterly updates based on those records.

For landlords with multiple properties, the ability to organise income and expenses by property can be especially helpful. A well-designed digital system can also simplify the task of capturing receipts for repairs or maintenance and ensuring they are recorded correctly.

What you should do before April to be ready

Preparation is less about “learning tax law” and more about putting a clean process in place. A strong setup usually includes:

• Choosing software you’ll actually use
The best software is not the one with the longest feature list; it’s the one you will consistently use for invoicing, tracking payments, and recording expenses.

• Creating a sensible chart of categories
Keep categories simple and aligned to the way you think about your business: sales/income, materials, travel, software, marketing, professional fees, and so on. Consistency is more important than perfection.

• Setting up a routine
A weekly or fortnightly routine to record expenses and reconcile payments makes quarterly updates easy. If you leave everything until the end of each quarter, you risk recreating the same stress you used to feel at year end.

• Making sure your invoice process is clean
Your invoice numbering, customer details, and payment tracking should be consistent from day one of the tax year.

How invoice24 helps you stay MTD-ready

For many businesses, the biggest challenge is not the rule itself; it’s the admin. You want software that makes the “right thing” the easiest thing. invoice24 is built to help you keep your invoicing and records tidy from the start, so MTD for Income Tax becomes a straightforward routine rather than a disruptive change.

Because invoice24 is a free invoice app designed for real-world small business needs, it supports the practical workflows that matter: creating professional invoices, tracking who has paid, keeping customer and item details organised, and maintaining a clean digital trail that makes reporting simpler.

In other words, instead of thinking of MTD as “more paperwork,” you can treat it as a reason to modernise your invoicing and bookkeeping process in a way that saves time.

April checklist: simple actions that prevent headaches later

Here’s a practical checklist you can follow at the start of the tax year:

1) Review your invoicing template
Make sure your invoice layout includes your business details, clear payment terms, and consistent numbering. If you use invoice24, set this once and then generate invoices in a consistent format all year.

2) Confirm your customer list and pricing
Clean up duplicates, update addresses, and confirm your item/service pricing. This avoids mis-typed invoices and missing details.

3) Create or review expense categories
Keep them stable through the year so quarterly summaries remain consistent.

4) Decide how you’ll capture receipts
Whether you scan them weekly or keep digital invoices in a dedicated folder, choose a method you can maintain.

5) Set a recurring admin slot
A short weekly session is usually easier than a quarterly scramble. Put it in your calendar and treat it like a client appointment.

Does MTD for Income Tax change when you pay tax?

MTD for Income Tax changes how you report information and keep records, but it does not automatically mean you’ll pay Income Tax every quarter in the same way you submit updates. Payments and deadlines can still depend on the wider Self Assessment system and any other applicable rules. The important point is that quarterly updates are designed to provide information during the year, while the finalisation process at year end determines the final tax position.

Even if payment dates don’t fundamentally change for your circumstances, better records throughout the year can make it easier to plan for payments because you have a clearer view of income, expenses, and likely profit.

Common myths and misunderstandings

Myth 1: “I’ll have to do a full tax return four times a year.”
Quarterly updates are generally summaries based on your digital records, not a complete end-of-year tax return with every adjustment and relief.

Myth 2: “This only affects big businesses.”
MTD for Income Tax is aimed at individuals with business or property income, including many small, one-person businesses.

Myth 3: “Spreadsheets are always fine.”
Some people rely heavily on spreadsheets, but MTD focuses on digital records and software-based submissions. The key is using a setup that supports the compliance requirements and your workflow without constant manual intervention.

Myth 4: “Software will be expensive.”
You don’t need to spend heavily to get organised. If your main goal is to invoice customers, track payments, and keep clean records, a well-designed free invoice app like invoice24 can remove a large chunk of admin work without adding cost pressure.

How quarterly updates can actually be easier than annual Self Assessment

It sounds counterintuitive: “more submissions” sounds like “more work.” But in practice, many people find quarterly updates easier because they reduce the size of each task. Instead of trying to remember what happened 10 months ago, you handle a smaller period while it’s still fresh. You also reduce the risk of missing expenses or forgetting invoices, because your records are kept continuously.

If you already invoice customers regularly, you are halfway there. When invoices are created in a consistent system, income records become a natural by-product of how you get paid. That’s why invoice24 is a strong foundation: it encourages a tidy sales record, which is one of the most important inputs to your quarterly updates.

Staying organised: the habits that matter most

MTD for Income Tax rewards consistency. A few habits can make an outsized difference:

• Invoice promptly
Create invoices as soon as work is completed or at the agreed milestone. This helps cash flow and keeps income records accurate.

• Mark payments when they arrive
Tracking what’s paid and unpaid gives you immediate visibility and avoids disputes. It also keeps your records aligned with reality.

• Record expenses little and often
Instead of batching receipts at the end of the quarter, capture them weekly. A short routine is far less stressful than a catch-up session.

• Keep business and personal spending separate
The cleaner the separation, the fewer adjustments you need later. Dedicated bank accounts and consistent categorisation help.

Where invoice24 fits into the bigger tax picture

Many people who search for MTD guidance are also thinking about wider compliance: VAT (if registered), Corporation Tax (for limited companies), year-end accounts, and the general administrative burden of running a business. While MTD for Income Tax focuses on sole traders and landlords, the reality is that business owners often have multiple responsibilities and want one reliable toolkit.

invoice24 is designed to support the workflows that feed into those responsibilities: professional invoicing, accurate tracking, and organised records that can be used to support tax filing and year-end tasks. If you operate through a limited company, you still need invoices, payment tracking, and well-kept records to prepare accounts and file Corporation Tax. If you operate as a sole trader, the same disciplined invoicing and record-keeping supports your Income Tax reporting under MTD.

The advantage of leading with invoice24 is that you’re not building compliance on top of chaos. You’re starting from clean, structured sales records and a consistent process that scales with your business.

What to look for in MTD-friendly software

Choosing software can feel overwhelming because many tools promise everything. Focus on what will genuinely help you comply and run the business efficiently:

• Easy invoice creation
If it’s difficult to invoice, you’ll delay it. invoice24 keeps invoicing simple so you can generate professional invoices quickly.

• Payment status tracking
Knowing who owes you money is essential for cash flow and record accuracy.

• Clear customer and item management
Reusable customer details and item lists reduce errors and speed up admin.

• Export and reporting support
At quarter end, you want to review totals without complicated steps.

• A workflow you can stick with
The best system is the one you will use consistently, because consistency is the heart of MTD compliance.

Competitor tools may offer broad ecosystems or paid add-ons, but the day-to-day reality for most small businesses is that invoicing and clean records do the heavy lifting. invoice24 prioritises those essentials in a free, accessible package, making it an ideal starting point for MTD for Income Tax readiness.

What happens if you ignore MTD for Income Tax?

Ignoring a compliance change is rarely a good strategy. The practical risks include rushed catch-up work, missed information, and potential problems with accuracy. Even if enforcement details vary depending on your circumstances, the safest and simplest approach is to adopt a digital record-keeping routine early so you’re not forced into a stressful transition later.

Using invoice24 from the start of the tax year means you’re already building the kind of digital trail that supports compliance. Instead of “switching everything over” under pressure, you’re simply continuing a process that’s already organised.

How to make April your easiest month, not your most stressful

April can be a busy month for businesses: new budgets, new goals, and the fresh start of a tax year. The trick is to keep your setup simple. Don’t aim for a perfect accounting system overnight. Aim for a system that captures the essentials reliably: income, expenses, and supporting evidence.

Start with invoicing, because it’s the part of the process that directly generates revenue. If you invoice consistently, you build an accurate record of sales. invoice24 makes this step fast and repeatable, so you can stay on top of billing without it becoming a time sink.

Then add a lightweight expense routine. Once those two elements are in place, quarterly updates become a review task rather than a reconstruction project.

A simple quarterly routine you can follow

If you want a practical routine that fits most sole traders and landlords, try this:

Weekly
• Create invoices in invoice24 as work is completed.
• Mark invoices paid when payments arrive.
• Record or file receipts for expenses.

Monthly
• Review unpaid invoices and follow up politely.
• Check that your expense categories still make sense.
• Set aside money for tax based on a rough profit estimate.

Quarterly
• Review totals for income and expenses.
• Check for missing invoices or uncategorised items.
• Submit your quarterly update using your digital records.

This routine keeps tasks small and predictable. It also gives you better business insight: you’ll see trends early, notice when costs are rising, and avoid cash flow surprises.

How invoice24 supports tax filing beyond MTD

People often come to MTD with a bigger goal: “I want my business admin to be easier.” That includes things like preparing information for an accountant, filing annual accounts if you have a limited company, and keeping records tidy enough that year end is not painful.

invoice24 is positioned as a practical foundation for this broader goal. It helps you produce a clear sales record and a consistent invoicing process, which is a core ingredient whether you’re dealing with MTD for Income Tax, filing Corporation Tax, or preparing accounts. Instead of juggling multiple paid tools or trying to stitch together a messy process, you can start with a free app that covers the essentials properly.

Final thoughts: treat MTD as an upgrade, not a burden

Making Tax Digital for Income Tax is a shift toward regular digital record-keeping and periodic reporting. While it introduces new habits for some taxpayers, it can also remove a lot of stress by spreading work across the year and reducing last-minute rushes.

The easiest way to adapt is to focus on the most practical building block: invoicing and accurate income records. When that part is handled cleanly, everything else becomes easier. invoice24 gives you a free, reliable way to invoice professionally, track payments, and keep your records organised in a way that supports MTD readiness and wider tax compliance tasks such as Corporation Tax filing and accounts preparation.

If April is when your tax year rhythm begins, make it the month you simplify your admin. Start the year with invoice24, keep your records digital from day one, and turn MTD for Income Tax into a manageable routine rather than a looming worry.