Frequently asked questions
Clear, simple answers to the most common questions about Making Tax Digital.
01
What is Making Tax Digital (MTD)?
Making Tax Digital is HMRC’s new system for reporting income. Instead of one Self Assessment each year, you’ll keep digital records and send quarterly updates through approved software.
02
Who must follow MTD and when?
MTD becomes mandatory in three phases:
- From April 2026: Income over £50,000
- From April 2027: Income £30,000–£49,999
- From April 2028: Income £20,000 - £29,999
03
What counts as “qualifying income”?
HMRC looks at your total gross income from:
- Sole trader business income
- Rental income
These are added together. If the combined total meets the threshold, MTD applies.
04
Do I still need to file a self assessment?
Yes — but it changes. Under MTD you’ll submit:
- Quarterly updates
- An End of Period Statement (EOPS)
- A Final Declaration (replaces the Self Assessment return)
05
What software do I need?
HMRC requires approved software. At LattaCook, we use QuickBooks Online — fully recognised for MTD for Income Tax. We run it for you, so you never need to log in.
06
What happens if I miss a quarterly update?
HMRC has confirmed that 2026/27 is a bedding‑in year. There are no penalties for late quarterly submissions during this period. After that, penalties may apply.
07
Do I need to keep digital records?
Yes. MTD requires digital records of all income and expenses. We maintain these for you inside QuickBooks. We recommend you use a separate business bank account.
08
What if I have multiple businesses or rental properties?
You’ll submit separate quarterly updates for each business or property type. We manage all of this for you inside QuickBooks.
09
Do I legally need a business bank account?
No. Sole traders and landlords are not legally required to have a separate business account.
But keeping business and personal money apart makes MTD much easier and reduces the risk of mistakes.
10
Can I use my personal bank account for MTD?
You can, but it often leads to mixed transactions, missing income, and harder quarterly updates.
A separate account keeps your digital records cleaner and easier to manage.
11
Will a business bank account make MTD simpler?
Yes. When your business transactions are in one place, it’s quicker to categorise them, easier to keep digital records, and far less stressful when it’s time to submit your quarterly updates.
12
Do I need to switch banks to open a business account?
No. You can open a separate account with your existing bank or choose a digital provider. The important part is keeping business and personal spending separate — not which bank you choose.