Making Tax Digital: What to Do This Month

Quick answer: what should I do now?

If MTD for Income Tax applies to you, the main steps are:

1. Confirm your MTD start date.
2. Choose compatible software.
3. Sign up for MTD with HMRC.
4. Authorise your software to connect with HMRC.
5. Start keeping digital records from your MTD start date.
6. Record income, expenses, receipts, and mileage properly.
7. Submit your quarterly updates through software.
8. Complete your final tax return after the end of the tax year.

The earlier you get organised, the less stressful each quarterly update will be.

Where are you starting from?

Your next step depends on your current position.

Use the guide below to find where to begin.

Your current situation | Start here
| ------------------------------ | ---------------- |
| You are not sure whether MTD applies to you | Read Post 1 first |
| You know MTD applies, but you have not chosen software | Start at Step 1 |
| You have chosen software, but have not signed up | Start at Step 2 |
| You have signed up, but have not authorised your software | Start at Step 3 |
| You have software, but your records are not up to date | Start at Step 4 |
| Your first quarterly deadline is approaching | Start at Step 6 |
| You work with an accountant | Read Steps 1–3, then confirm who is handling the remaining steps

Step 1: Choose compatible software

Before signing up for MTD for Income Tax, you should choose software that is compatible with HMRC’s MTD for Income Tax service.

This is important because you will use your software to:

• keep digital records
• categorise income and expenses
• send quarterly updates
• submit your final tax return
• connect to HMRC

Do not assume that software is suitable just because it says “MTD compatible”. Some software supports MTD for VAT but may not support MTD for Income Tax.

Before you commit, check that the product supports Making Tax Digital for Income Tax specifically.

Common options include:

• all-in-one accounting software
• spreadsheet plus bridging software
• software supported by your accountant

If you are unsure, speak to your accountant before signing up. Choosing the wrong software can make MTD more difficult than it needs to be.

Step 2: Sign up for MTD with HMRC

Once you have chosen software, the next step is to sign up for Making Tax Digital for Income Tax.

If you manage your own tax affairs, you will usually need:

• your Government Gateway user ID and password
• your National Insurance number
• your Self Assessment details
• your chosen compatible software
• your accounting period information

If your accountant manages your Self Assessment, ask them directly:

• Have I been signed up for MTD for Income Tax?
• Do you have agent authorisation for MTD for Income Tax?
• Will you submit my quarterly updates?
• What do you need from me each month?

This is important because existing Self Assessment authorisation is not always the same as MTD authorisation.

Do not leave sign-up until the day your quarterly update is due. HMRC systems and software authorisation can take time.

Step 3: Authorise your software to connect with HMRC

Signing up for MTD and authorising your software are connected, but they are not the same thing.

Your software needs permission to communicate with HMRC.

Inside your software, there should be an authorisation process where you log in with your Government Gateway details and approve the connection.

Without this authorisation, your software may be able to prepare your records, but it may not be able to submit quarterly updates.

Before your first deadline, check that:

• your software is connected to HMRC
• the correct tax year is showing
• your Self Assessment details are linked
• your income sources are set up correctly
• your accountant has access, if needed

Step 4: Set up your records properly

Once the software is ready, you need to set up your records.

This usually includes:

• connecting your bank feed
• setting your accounting period
• adding your business details
• setting up income and expense categories
• adding opening balances, if needed
• uploading receipts
• recording mileage, where relevant
• separating business and personal transactions

If you use a personal bank account for business, your bookkeeping will need more care because business and personal transactions are mixed together.

A separate business bank account is usually cleaner and easier to manage.

If you are a landlord, make sure your software can separate property income and expenses from any self-employment income.

If you have more than one property, ask whether your software can track them separately.

Step 5: Get your records in order from your MTD start date

MTD requires you to keep digital records from your MTD start date.

For the first group, this is 6 April 2026.

If you are reading this after your start date and your records are not up to date, do not panic.

Start by collecting:

• bank statements
• sales invoices
• receipts
• mileage records
• rental statements
• letting agent statements
• loan or mortgage interest information
• business expense records

Then enter your income and expenses into your software from your MTD start date.

For each transaction, try to record:

• the date
• the amount
• the income or expense category
• a short description
• the receipt or supporting evidence, where available

The goal is not perfection from day one.

The goal is to build a clean, reliable record-keeping system that you can maintain each month.

Step 6: Understand what a quarterly update actually is

A quarterly update is not a full tax return.

It is a summary of your income and expenses sent to HMRC using your software.

Your software uses the digital records you have entered and sends the quarterly totals.

A quarterly update usually includes:

• total income for the period
• expenses by category
• self-employment income, if applicable
• property income, if applicable

A quarterly update does not usually include the full year-end adjustments, allowances, reliefs, or other income that may be included in your final tax return.

You do not normally pay tax when you submit a quarterly update.

Your final tax position is confirmed after the end of the tax year when you submit your final tax return.

However, quarterly updates can help you see an in-year estimate of your tax position, which can make planning easier.

Step 7: Send your first quarterly update

If you are in the first MTD wave from 6 April 2026, your quarterly update deadlines are:

Update | Deadline
| --- | ---: |
| First quarterly update | 7 August 2026 |
| Second quarterly update | 7 November 2026 |
| Third quarterly update | 7 February 2027 |
| Fourth quarterly update | 7 May 2027 |
| Final tax return for 2026/27 | 31 January 2028 |

Before sending your update, check that:

• all income has been recorded
• expenses are categorised correctly
• bank transactions have been reviewed
• receipts have been uploaded where possible
• mileage or travel claims have been recorded correctly
• property income and expenses are separated, if relevant
• the totals look reasonable

Then use the MTD submission feature inside your software to send the update to HMRC.

After submitting, save or download the confirmation that HMRC received it.

Step 8: Prepare for your final tax return

MTD does not remove the need for a final tax return.

After the end of the tax year, you still need to finalise your tax position.

Your final tax return is where you:

• review the full year’s income and expenses
• correct or adjust figures, if needed
• add other income such as employment income, dividends, savings interest, or pension income
• claim allowances and reliefs
• include capital allowances, where relevant
• include Gift Aid or pension contributions, where relevant
• confirm the final tax calculation
• submit the return through software

For the 2026/27 tax year, the final tax return deadline is 31 January 2028.

Your tax payment deadline also remains 31 January, unless HMRC rules or your individual circumstances say otherwise.

What if you are already behind?

If your MTD start date has passed and you have not signed up, chosen software, or kept digital records, follow this order:

1. Choose compatible software.
2. Sign up for MTD with HMRC.
3. Authorise your software to connect with HMRC.
4. Collect your records from your MTD start date.
5. Enter your income and expenses into the software.
6. Review the figures carefully.
7. Submit any quarterly updates that are due.
8. Set up a monthly routine going forward.

Do not spend weeks comparing software while your records fall further behind.

Choose a suitable option, get your records organised, and move forward.

For the 2026/27 tax year, HMRC has said it will not apply penalty points for late quarterly updates for those required to use MTD from 6 April 2026.

However, this does not mean you can ignore MTD.

You still need digital records and quarterly updates before you can submit your final tax return. Penalties can still apply for late tax returns and late payment of tax.

A simple monthly routine to stay on top of MTD

MTD becomes much easier when you deal with your records monthly instead of waiting until each quarterly deadline.

Set aside 30 to 45 minutes once a month to:

• check your bank feed is working
• categorise new transactions
• upload missing receipts
• record mileage
• check unpaid invoices
• review rental income and property costs
• add notes for unusual transactions
• ask your accountant about anything unclear

This small monthly habit can save hours of stress later.

By the time each quarterly deadline arrives, you should only need to review the totals and submit.

Working with an accountant under MTD

If you work with an accountant, MTD can become much easier.

Your accountant may help with:

• checking whether MTD applies to you
• choosing software
• setting up the system
• connecting bank feeds
• reviewing records
• correcting bookkeeping errors
• submitting quarterly updates
• preparing your final tax return

At Aurestone Advisory, we help sole traders and landlords get ready for MTD without the confusion.

We can help with software setup, digital records, quarterly submissions, and the final tax return.

You still need to keep your records updated, but you do not have to manage the whole process alone.

Your MTD checklist

Use this checklist to see what still needs doing.

• I have checked whether MTD applies to me.
• I know my MTD start date.
• I have chosen MTD-compatible software.
• I have signed up for MTD with HMRC.
• I have authorised my software to connect with HMRC.
• I have connected my bank feed or set up imports.
• I have set my accounting period.
• I have set up income and expense categories.
• I have started keeping digital records from my MTD start date.
• I have uploaded or saved receipts.
• I have recorded mileage, where relevant.
• I know my quarterly update deadlines.
• I have sent, or prepared to send, my first quarterly update.
• I have set a monthly bookkeeping routine.
• I know who is preparing my final tax return.

The series: all three posts

Post 1: Are You Affected by Making Tax Digital for Income Tax?

Who needs to comply, the income thresholds, exemptions, and what happens if you ignore it.

Post 2: What Software Do You Need for Making Tax Digital?

A guide to your software options, including all-in-one tools, bridging software, spreadsheets, and what to look for.

Post 3: What to do this month

You are here.

Need help getting MTD ready?

If you are a sole trader, freelancer, contractor, or landlord and you are not sure what to do next, Aurestone Advisory can help.

We can help you:

• check whether MTD applies to you
• choose suitable software
• set up your bookkeeping system
• connect your bank feed
• organise your records
• prepare quarterly updates
• submit your final tax return
• avoid last-minute stress

Book a free review with Aurestone Advisory or message us on WhatsApp.