Making Tax Digital timeline – past changes, current rules, and what’s coming next

Making Tax Digital hasn’t arrived all at once. It’s been rolled out in stages, shaped by legislation, testing phases and a fair amount of course-correcting along the way. Making Tax Digital is a significant initiative and marks a transformation of the UK tax system, with the government playing a central role in driving these changes.

Making Tax Digital (MTD) is a flagship HMRC program designed to modernise the UK tax system from paper-based annual reporting to mandatory digital real-time reporting.

This Making Tax Digital timeline looks at the past changes that got us here, the current rules businesses need to follow, and what’s coming next for income tax, landlords and sole traders under MTD ITSA.

A quick reminder – what MTD is trying to fix

Before diving into dates, it’s worth grounding this in purpose.

Making Tax Digital is HMRC’s long-term mission to modernise the UK tax system – replacing paper records and annual reporting with digital records, digital record keeping and more frequent updates. Digital record keeping helps reduce human error and improves accuracy in tax calculations, as it minimises errors compared to manual processes and helps prevent data loss or penalties due to mistakes, reinforcing the wider benefits of Making Tax Digital for businesses and individual taxpayers. The goal is better data, more accurate tax calculations and fewer errors across the system.

Now, the timeline.

Past changes – how we got here

April 2019 – MTD for VAT begins

The first major milestone came in April 2019, when Making Tax Digital for VAT came into force and became mandatory for all businesses with taxable turnover above the VAT threshold of £85,000.

From this point, affected businesses had to:

• Maintain digital records for VAT
• Use compatible software to submit VAT returns
• Follow digital requirements around digital links.

Once MTD is introduced, it comes into force and it is mandatory for all businesses to maintain digital records.

This marked a clear shift away from spreadsheets and manual processes, and set the blueprint for future MTD services, building on lessons from early MTD VAT pilots and developments.

April 2022 – VAT MTD expands

In April 2022, MTD for VAT was extended to all VAT registered businesses, regardless of turnover, extending the requirements to include even those below the previous threshold.

This brought many smaller businesses into scope for the first time, including sole traders who had previously relied on paper or spreadsheet-based systems.

For many firms, this was a great addition to their digital service offering – but also a clear signal that MTD wasn’t stopping at VAT, as the government plans to further extend MTD requirements in the future to cover businesses with higher turnover thresholds and partnerships, and may extend deadlines in cases of hardship or unavoidable circumstances.

Early pilots – testing MTD for Income Tax

Alongside VAT changes, HMRC began a long testing phase for MTD for Income Tax Self Assessment (MTD ITSA).

These pilots focused on:

• Quarterly updates of income and expenses
• Digital record keeping for income tax
• How taxpayers and agents interact with the service.

HMRC used feedback from the pilot programme to review and refine the MTD for Income Tax process. The requirement for an End of Period Statement (EOPS) was removed as part of the changes to MTD for Income Tax in December 2022.

Take-up was limited, guidance evolved slowly, and many agents quite sensibly took a wait-and-see approach.

Current rules – where things stand now

MTD for VAT – business as usual

For VAT registered businesses, MTD is now embedded in day-to-day life.

Businesses must:

• Keep digital records
• Use MTD-compatible software to achieve MTD compliance
• Submit VAT returns via MTD-compatible software

HMRC provides lists of recognised services to help businesses choose MTD-compatible software, and firms should focus on key things to look for in MTD-compliant software.

The ‘soft landing’ period for digital links ended in April 2021, so all data transfers between software programs must now be digital.

HMRC’s focus here has shifted from education to enforcement, with penalties applying where businesses are unable or unwilling to comply.

MTD ITSA – still in transition

MTD for income tax is not yet mandatory, but it is very much live in the background.

The current position is:

• MTD ITSA remains voluntary for most taxpayers, but taxpayers should assess their compliance status and prepare for upcoming changes
• HMRC continues to test and refine the service
• Software providers are developing and improving solutions.

Individuals should consider their qualifying income to determine when they need to start using Making Tax Digital.

This is the stage where accountants can build knowledge, test processes and support clients without the pressure of full compliance, while mapping out key MTD for Income Tax dates accountants need to track.

What’s coming next – MTD for Income Tax

Who will be affected

Under current legislation, MTD ITSA will apply to individuals with qualifying income over the threshold from:

• Self employment
• Property income (including landlords)

From 6 April 2026, individuals with eligible personal income (money) reaching £50,000 or above will need to comply with MTD for Self Assessment, and from 6 April 2027, the threshold will be reduced to £30,000. The original income threshold for MTD for Income Tax was raised from £10,000 to £50,000 in 2022. As of December 2022, MTD for Income Tax is expected to be mandatory by April 2026 with higher income thresholds than originally proposed. Sole traders and landlords with a total annual income above £50,000 will be required to use MTD-compatible software for digital record-keeping and to file returns from April 2026.

This includes many sole traders and landlords who have never previously needed digital record keeping software, making tools like MTD-ready software for small businesses, sole traders and landlords increasingly important. In addition, partnerships will also be required to comply with MTD for ITSA in the future; for instance, HMRC has announced plans to extend the scheme to partnerships as part of the broader digital tax initiative.

What will change

Once mandated, eligible taxpayers will need to:

• Maintain digital records for income and expenses
• Use MTD-compatible software to submit tax returns and quarterly updates, which must be submitted to HMRC
• Submit quarterly updates during the tax year detailing all business income and expenditure
• Confirm figures through an end-of-period report
• Finalise their position with a final declaration

The first major MTD requirement for Income Tax will come into effect in April 2026, requiring sole traders and landlords with a total annual income above £50,000 to use MTD-compatible software, so many will need specialised MTD for Income Tax software for quarterly submissions.

This replaces the traditional once-a-year income tax return with a more regular reporting process.

Penalties and the points based system

Late or missed submissions will fall under a points based system, rather than immediate fines.

Points accrue for missed deadlines, and penalties apply once a threshold is reached. This is designed to be fairer, but it is crucial for taxpayers to stay on top of quarterly obligations to avoid penalties.

Why HMRC is pushing ahead

From HMRC’s perspective, this future model delivers:

• More accurate reporting of income
• Earlier visibility of potential tax liabilities
• Better support and guidance through digital services.

Digital tools are designed to simplify the process of complying with Making Tax Digital, making it easier for businesses to manage their obligations. Implementing best practices for bookkeeping will also help businesses comply with MTD more smoothly.

For taxpayers, the promised benefit is fewer surprises, clearer insight into what they need to pay, and more time to plan.

Why this timeline matters to accountants

Understanding the Making Tax Digital timeline – past changes, current rules and future plans – helps accountants do three things well. Accountants should regularly assess client compliance and review processes to ensure readiness for MTD, recognising how Making Tax Digital may reshape the role of accountants.

1. Give calm, confident advice

Clients are often overwhelmed by headlines and half-heard messages. Being aware of evolving regulations and deadlines is key to giving calm, confident advice. Being able to explain what applies now, what doesn’t, and what’s ahead builds trust.

2. Plan software and processes properly

MTD is as much about process as it is about tax. Firms should decide on the right digital tools early by considering budget, ease of use, trustworthiness, and user feedback, allowing them to spread change rather than scrambling close to go-live dates.

This is where Capium’s Making Tax Digital software can help, alongside a dedicated MTD hub for accountants to manage clients with confidence.

3. Turn compliance into a better service

Quarterly updates open the door to better conversations about cashflow, expenses, growth and planning – not just year-end compliance. Handled well, MTD can be a benefit rather than a burden. By providing clients with details and support, you can turn compliance into a value-added service.

The bigger picture

Making Tax Digital is not a one-off event. It’s a long-term shift in how tax in the UK works, driven by technology, legislation, and HM Treasury’s wider digital ambitions. The UK government continues to shape regulations and expectations for MTD, and the subject is evolving, so readers should expect further changes as new guidance is released.

The timeline shows a clear direction of travel – more digital records, more frequent reporting, and a tax system built around real-time data. Maintaining digital records will be mandatory for all businesses under Making Tax Digital. For example, if your qualifying income is over £20,000, you will need to use Making Tax Digital for Income Tax by the end of the current Parliament, as the phased rollout begins from 6 April 2026. Individuals and businesses should start using appropriate software as soon as practicable to avoid last-minute issues, ideally choosing comprehensive MTD software covering VAT and ITSA.

HMRC confirmed in July 2025 that they do not plan to proceed with mandatory MTD for Corporation Tax. For further details on regulations and compliance, visit the relevant HMRC page. It is important to carry out regular account reviews and stay informed about changing regulations to ensure ongoing compliance and avoid penalties.