How to Register for Making Tax Digital?
- Adil Akhtar
- 3 days ago
- 15 min read
How to Register for MTD in the UK – A Practical Guide for 2025/26
Why Register for MTD?
In my practice advising clients—ranging from small sole traders to larger landlords—one thing is clear: early registration and compliance with MTD can mitigate late filing fines, streamline your record-keeping, and reduce the stress that comes with the tax return rush. Since MTD aims to digitise the process of reporting income and expenses, understanding the registration process is your first step toward smoother tax management.
Who Needs to Register?
HMRC’s system is phasing in MTD compliance, focusing on:
● VAT-registered businesses (already enrolled automatically)
● Self-employed individuals and landlords, whose gross income exceeds £50,000 in the current tax year (from April 2026)
● Agents managing clients’ tax affairs, who need to set up an Agent Services Account (ASA) and seek client authorisation
Let’s look at each group through a practical lens.
Understanding the Current Thresholds (2025/26)
For the upcoming tax year, the thresholds are:
Group | Threshold | Effective From | Notes |
VAT-registered businesses | Already enrolled | Ongoing | Already in MTD |
Self-employed & landlords | £50,000 | April 2026 | Phased in over next years |
Smaller landlords & self-employed | £30,000 | April 2027 | The threshold drops |
Very small businesses | £20,000 | April 2028 | The final threshold |
If you’re earning over £50k in your self-assessment, you must prepare for registration now, even if the start date is a few months away.
What You Need Before Registering
Preparation is vital. Many clients trip up because they don’t have the right tools or details in place. Here’s what I recommend:
● Government Gateway ID: Your usual login for HMRC services
● Tax details: VAT number (if VAT-registered), National Insurance number, UTR (Unique Taxpayer Reference)
● Email address linked to your HMRC account
● Compatible software: This is non-negotiable, as all filings must be digital via approved software. I advise clients to choose platforms like FreeAgent, Xero, or QuickBooks, which support MTD integration
● Agent or Business Services Account (for agents): To manage multiple clients’ authorisations and submissions
Step-by-Step: Registering as a Sole Trader or Property Landlord
Log in to your personal tax account at
Navigate to the MTD registration section, or search “Sign up your client for MTD” on GOV.UK.
Follow the prompts to provide your business details and confirm your software provider.
Connect your chosen software with HMRC (this usually involves authorising the software via your Government Gateway ID).
Await confirmation from HMRC (usually within 72 hours by email). You’re now registered to submit quarterly updates and your end-of-year tax return through compatible software.
For Agents Registering Clients
Log into your Agent Services Account
Ensure your client has authorised you via their tax account or detailed authorisation
Use the sign-up service at GOV.UK to register multiple clients simultaneously, which streamlines ongoing compliance.
Important Tips and Common Pitfalls
● Don’t rush registration without software in place—HMRC will require you to have MTD-compatible tools.
● Check your VAT status early—if registered for VAT, you are already enrolled.
● Ensure your email and contact details are current; HMRC will communicate updates via email.
● For larger businesses, consider automation: Many software providers offer automatic data upload from bank feeds, which can cut down manual input errors.
Registering for MTD in the UK in 2025 involves understanding your eligibility, preparing your digital infrastructure, and completing a straightforward sign-up via HMRC’s online services. Early registration ensures compliance by the deadlines and reduces surprises when the phased roll-out hits your income level.
Making Tax Digital UK Statistics Dashboard
Preparing Your Records and Accounts for MTD: Practical Steps for UK Taxpayers and Business Owners
Picture this: You’ve just signed up for Making Tax Digital (MTD) and now you’re staring at a pile of receipts, spreadsheets, and bank statements wondering, “How do I get all this ready in a way HMRC will accept?” This is where many UK taxpayers and business owners—whether self-employed, landlords, or small companies—hit their first real challenge.
Having advised clients across London, Manchester, and beyond for over 18 years, I’ve seen firsthand how a clear system for record-keeping can make or break your MTD compliance. So, let’s get practical and break down exactly what you need to do to get your financial records shipshape for MTD.
What Does MTD Mean for Your Records in 2025/26?
MTD requires that all records you send to HMRC must come from software that digitally records and keeps your business transactions. The days of hand-written ledgers or spreadsheets detached from your submissions are on the way out.
The Basics: What Records Must You Keep?
Whether you’re self-employed or a business owner, you need to keep:
● Sales and income records: All your invoices, receipts, and bank deposits related to sales or income
● Business expenses: Receipts and details on costs such as office supplies, travel, tools, or professional fees
● VAT records (if applicable): All purchase and sales invoices with VAT details
● Payroll records (if you have employees)
● Assets and capital allowances: Records of purchases like machinery or vehicles that qualify for tax relief
Important: These need to be stored digitally and accessible in your MTD-compatible software.
Taxpayers with Multiple Income Sources: What to Watch For
This is a sticking point for many. Take Claire, a client from Bristol, who runs a small web design business while renting out two properties. Her income streams come from self-employment, rental profits, and part-time employment.
Under MTD, Claire must:
● Keep separate digital records for each income source if required (e.g., separate property income records)
● Ensure her digital software can handle multiple income streams and report them correctly to HMRC
● Submit quarterly updates for each income type if above the thresholds
A word of advice: Some software platforms allow you to consolidate income types, but always confirm they’re MTD-compliant for your business profile.
How to Choose MTD-Compatible Software
This is where many get stuck. Not all accounting software is created equal, and HMRC maintains an official list of MTD-compatible products.
What to look for:
● Compatibility with your business type: Sole trader, landlord, partnership, limited company
● Feature set for your specific needs such as detailed expense tracking, CIS (Construction Industry Scheme) deductions if a contractor, or capital allowances computation
● Ease of integration: Does it connect smoothly with your bank accounts for transaction importing?
● Robust audit trail: HMRC requires clear digital audit trails for every transaction
Practical Comparison of Popular MTD Software (2025/26)
Software | Suitable For | Key Features | Cost (Approximate) | Notes |
Xero | All business types | Bank feeds, invoicing, payroll, robust reporting | Monthly £12 - £30 | Widely used; excellent user interface |
FreeAgent | Sole traders, small landlords | Expense tracking, bank feeds, tax calculation | Monthly £10 - £25 | Favoured by UK freelancers and small landlords |
QuickBooks Online | Business owners, contractors | Payroll, CIS compliance, invoicing | Monthly £15 - £35 | Strong integration with third-party apps |
Sage Business Cloud | SMEs, contractors | Power user features, robust reporting | Monthly £12 - £30 | Vendor-friendly with strong support |
These are examples based on client cases—remember, the right tool depends on your specific business or tax profile.
Record-Keeping Pitfalls I’ve Seen Clients Make
Over the years advising on MTD, some common pitfalls keep cropping up:
● Incomplete records: Missing receipts or digital copies make audits a headache. Create a system for scanning and storing digital invoices asap.
● Incompatible software: Several clients tried to use outdated software or manual spreadsheets. HMRC rejects files if they don’t meet digital requirements.
● Not accounting for side hustles or rental income separately, leading to underreporting.
● Ignoring regional tax nuances: For Scottish or Welsh income tax, MTD updates might differ due to jurisdictional rates—important for landlords or freelancers working across UK nations.
Record-Keeping Checklist for MTD Compliance
● Maintain digital records of all income and expenses
● Use HMRC-approved software tailored to your situation
● Regularly update your software with bank statements or invoice data
● Reconcile your records monthly to avoid discrepancies
● Backup all digital records securely
● Keep paper copies for original invoices only if necessary but digitise immediately
● Understand how regional tax differences affect your record submission
What About Those of You Running PAYE and Self-Employment Together?
Take David from Edinburgh, who’s employed full-time (PAYE) but also runs a weekend handyman service. David’s pay slip shows income tax deducted at source, but his self-employment earnings need separate reporting. Under MTD for income tax, David would:
● Check his PAYE tax code matches expectations using his personal tax account
● Maintain digital records for self-employment income and expenses
● Submit quarterly MTD updates via software for self-employment
● Consider interaction between PAYE and self-assessment for precise tax liability calculations
This interplay is critical to avoid tax underpayments or unexpected year-end bills. That’s something I’ve had numerous clients caught out by, especially with emergency tax codes or confusing benefit-in-kind entries.
How to Handle Emergency Tax or High-Income Child Benefit Charge Cases
Another area often glossed over but important in MTD compliance is cases involving:
● Emergency tax codes: You may need to manually adjust your digital submissions if over-taxed early in the year.
● High-income Child Benefit Charge (HICBC): If you or your partner earn over £50,000, you must report and pay this charge correctly through your MTD submission.
Both require maintaining additional digital records and understanding how these affect your tax calculations under MTD.
Verifying Your Tax Liability and Maximising Reliefs Under MTD: Expert Insights for UK Taxpayers and Business Owners
None of us loves tax surprises, but here’s how to avoid them by using your MTD records to verify, calculate, and, where possible, optimize your income tax liability. After advising clients from London to Glasgow through tax years 2023 to 2025, some practical lessons have emerged about spotting hidden savings, common errors, and how simple checks can lead to better tax outcomes.
How to Use MTD Records for Accurate Tax Calculations
Let’s think about your situation—if you’re self-employed, employed, or a landlord, your digital MTD records become the backbone of understanding exactly what you owe or what’s owed to you.
Here’s a practical workflow:
Gather your digital income and expense records from your MTD-approved software.
Calculate gross income from all sources separately: for example, self-employment income, rental income, and PAYE earnings.
Apply the relevant expenses and allowable deductions for each income stream to determine taxable profits.
Refer to updated tax bands for 2025/26 to calculate tax due.
Below is the current tax band for the UK for 2025/26 (excluding Scotland, which has its own rates):
Income Band | Tax Rate 2025/26 |
Personal Allowance | Up to £12,570 |
Basic Rate | £12,571 to £50,270 at 20% |
Higher Rate | £50,271 to £125,140 at 40% |
Additional Rate | Over £125,140 at 45% |
If you live in Scotland, the rates differ, so check your local council tax office or use official resources.
Real-World Anecdote: Spotting Overpayment
Take Bob from Manchester, who discovered an overpayment of £450 after reconciling his MTD records with his year-end P60 and dividend statements. His software showed he had been paying emergency tax early in the year without appropriate allowances recorded, a situation I’ve seen quite often in my practice.
Spotting Underpayment and Avoiding Penalties
Conversely, many clients come unstuck by:
● Forgetting side hustles (like Claire’s rental income).
● Missing allowable business expenses or CIS deductions.
● Underestimating the high-income child benefit charge impact.
Use your MTD system to ensure every income stream is included and assessed accurately. Many software providers now have built-in checks for underreporting risks.
Step-by-Step Checklist to Verify Income Tax Liability Using Digital Records
● Extract your total income figures from MTD software.
● Confirm allowable expenses and reliefs entered.
● Cross-check digital records against paper statements (e.g., dividend vouchers, P60).
● Calculate tax using the latest rates and band thresholds.
● Adjust for any tax already paid via PAYE or payments on account.
● Identify potential reliefs: Marriage Allowance, Blind Person’s Allowance, or business-related reliefs.
● Review any specific charges applicable, like HICBC or Class 4 National Insurance for the self-employed.
Practical Tax Reliefs and Allowances to Consider
Remember that tax bands are only part of the picture. Many UK taxpayers miss out on reliefs that could reduce their tax bills substantially:
● Personal Allowance: Frozen at £12,570 for 2025/26 despite inflation.
● Marriage Allowance: Transfer up to 10% of unused personal allowance between spouses if one has low income.
● Capital Allowances: Businesses deduct costs of assets like equipment progressively.
● Trading Allowance: £1,000 tax-free on casual or small trading income.
● Property Allowance: £1,000 allowance on rental income.
● High-Income Child Benefit Charge: Applies if income exceeds £50,000.
● Tax relief for Pension Contributions: Can reduce taxable income.
For my clients who run businesses, I always recommend detailed tracking of capital spending and regular reviews for optimising allowances, especially when dealing with equipment or vehicle purchases.
Case Study: Navigating Complex Income for a Freelance Contractor
Helen operates under IR35 rules as a contractor in London. When MTD reporting began, she was unsure how to treat intermediary payments and deductions. By linking her software directly with HMRC, Helen could:
● Accurately report CIS deductions at source.
● Confirm payments on account were adjusted for contract income.
● Avoid double-taxation by monitoring Real Time Information (RTI) submissions from her agency.
This detail-oriented process saved Helen from late penalties and reduced her administrative burden significantly.
How to Use HMRC’s Personal Tax Account for Real-Time Checks
Your personal tax account is your best friend under MTD. Here, you can:
● Check your tax code against your digital records.
● See estimated tax bills and payments on account.
● Verify any underpayment or overpayment statuses.
● Manage your tax reliefs.
Try logging into your personal tax account quarterly to compare it with your software’s figures.
Handling Scottish and Welsh Income Tax Variations
If you live or work in Scotland or Wales, MTD accommodates different tax regimes:
● Scottish Rates: Apply to non-savings and non-dividend income.
● Welsh Rates: Vary slightly from rest of UK rates.
Your digital software should allow for regional tax codes. As an example, Neil from
Edinburgh found discrepancies when switching software that didn’t fully account for Scottish bands. Always verify your software configuration settings for location-based tax rates.
Summary of Key Points
Register early for MTD if your income exceeds thresholds to avoid penalties.
Registration is the gateway to compliance and smooth tax management.
Keep digital records of all income and expenses separate by income source where necessary.
Accurate records prevent HMRC disputes and errors.
Choose MTD-compatible software tailored to your business needs.
Compatibility reduces ingestion errors and eases filing.
Use your digital records to calculate your taxable income precisely using up-to-date rates and bands.
This avoids under- or overpayment issues.
Consider all tax reliefs and allowances available to maximise savings.
Many taxpayers miss out on key reliefs due to lack of awareness.
Regularly reconcile your digital bookkeeping with HMRC’s personal tax account.
This provides real-time visibility of your tax position.
Account for multiple income streams carefully to avoid underreporting.
Side incomes can trigger significant tax liabilities if ignored.
Be mindful of regional tax variations in Scotland and Wales.
Ensure your software and tax calculations reflect your location.
Understand complex scenarios such as emergency tax codes or HICBC charges.
These often require manual checks and adjustments in your digital records.
Engage with MTD as a proactive tax management tool rather than a burden.
It simplifies keeping HMRC up-to-date and enables better financial planning.
FAQs
Q1: Can someone change their tax code if it’s incorrect while using MTD?
A1: Well, it’s worth noting that while MTD itself focuses on digital record-keeping and reporting, your tax code remains set by HMRC. If you spot an incorrect tax code on your PAYE payslip or personal tax account, you should contact HMRC directly to get it corrected. In practice, incorrect tax codes can cause overpayment or underpayment, and fixing them early ensures your MTD submissions reflect your true position.
Q2: How does MTD affect someone with multiple part-time jobs under PAYE?
A2: In my experience, multiple PAYE jobs can create confusion because each employer works with a separate tax code, and tax is calculated independently. MTD won’t merge these jobs but helps you manage self-employment or property income alongside them digitally. Keep separate digital records of any side income and integrate them into your annual return to avoid underpayment.
Q3: If a sole trader’s income fluctuates below the MTD threshold in one year, can they opt out?
A3: Good question. The income threshold for MTD mandation is assessed based on the gross income reported in the most recent return before the mandation date. So if last year’s income was above £50,000, you’ll need to comply even if this year’s expected income is less. However, if your income drops significantly and stays below the threshold for subsequent tax years, you can notify HMRC that you no longer need to follow MTD rules.
Q4: How can someone with rental income and self-employment income keep digital records under MTD?
A4: Combining rental and business income digitally can be tricky. I advise clients to use software that supports multiple income streams and allows you to separate rental records from business transactions. This helps when preparing quarterly updates for each source and ensures no income slips through the cracks.
Q5: Are there any exceptions to MTD for people with disabilities or poor internet access?
A5: Yes. The government recognises that for some taxpayers, using digital tools may be impractical due to disability, age, location, or other reasons. In such cases, HMRC allows exemptions upon application. It's essential to notify HMRC and satisfy their criteria to be exempted legitimately.
Q6: How does Scottish or Welsh income tax variation impact MTD reporting?
A6: For residents in Scotland and Wales, regional income tax rates differ from the rest of the UK. While MTD requires digital submissions, your software or accountant must apply the correct regional tax rates based on your residency, reflected in your tax code. I've encountered freelancers in Edinburgh surprised when their software defaulted to UK rates; always verify your settings.
Q7: Can an agent register a client for MTD on their behalf?
A7: Absolutely. Agents with Authorised Agent Services Accounts can register clients for MTD digitally, provided they have the client’s authorisation. This often simplifies the process for business owners unfamiliar with digital tax accounts.
Q8: What if HMRC sends a letter requiring MTD, but the individual hasn’t yet submitted their tax return?
A8: It’s common to receive notification to enrol in MTD soon after submitting a qualifying year’s tax return. The key is to register for MTD as soon as possible to remain compliant. Delays risk penalties, so treat these letters as prompts to act swiftly.
Q9: How do emergency tax codes affect MTD compliance?
A9: Emergency tax codes can lead to over-withholding in PAYE but don’t directly affect MTD digital records. However, if your total tax paid via PAYE doesn’t reflect your final liability, ensure your MTD quarterly updates and final declaration account correctly for payments on account or refund claims.
Q10: What happens if a taxpayer underreports side income under MTD?
A10: Underreporting income, even unintentionally, risks HMRC investigations and penalties. One client with a side gig underestimated rental income accidentally because of poor record-keeping. Using MTD-compatible digital software that links bank feeds can minimise such errors by providing more accurate, up-to-date figures.
Q11: Are there simplified digital record-keeping options for very small businesses?
A11: Yes, some software solutions offer streamlined record-keeping focused on essentials, suitable for businesses near the threshold, but the digital link and compatibility requirements remain. Carefully select software that meets HMRC standards but fits your business scale.
Q12: Can someone voluntarily sign up for MTD even if under the income threshold?
A12: Yes, voluntary registration is possible and can be beneficial to familiarise oneself early, streamline tax planning, and potentially reduce errors. Some clients choose this for better financial control, especially landlords or freelancers preparing for future growth.
Q13: How does MTD handle income from gig economy platforms?
A13: Gig economy earnings must be recorded and reported digitally if you exceed the income thresholds. It’s common for gig workers like couriers or freelancers to miss reporting some earnings. Using bank account exports linked with MTD software helps capture all income, reducing under-reporting risk.
Q14: What should a business owner do if their MTD software crashes or loses data before submission?
A14: Always maintain backups and choose software with cloud storage and auto-save features. In a crisis, contact HMRC immediately to explain delays and avoid penalties. I’ve helped clients negotiate extensions due to technical failures when promptly communicated.
Q15: Are there special considerations for joint property owners regarding MTD?
A15: Yes. Each owner reports their share of rental income and expenses digitally through their own MTD submissions. Coordinating record-keeping is essential to avoid double counting or missing income — a critical point I stress when advising landlord clients with properties in shared ownership.
Q16: Is there an impact on National Insurance reporting when moving to MTD?
A16: MTD focuses primarily on income tax digital submissions; National Insurance contributions (NICs) generally continue through existing systems. However, keeping accurate digital earnings records helps ensure NIC assessments (especially Class 4 NICs for self-employed) are correctly calculated.
Q17: Can dividend income be reported via MTD?
A17: Dividend income currently isn’t within the scope of MTD quarterly updates. Dividend tax is reported on the annual self-assessment return. But maintaining comprehensive digital records of dividends alongside self-employed or property income can ease final submissions.
Q18: How should new business owners approaching the MTD threshold prepare?
A18: New businesses should start set-up with MTD-compatible software and begin digital record keeping immediately—even if under the threshold—to build good habits and avoid a last-minute scramble once they become mandatorily in scope.
Q19: Are gifts or one-off lump sums subject to MTD reporting?
A19: Gifts or one-off sums don’t usually count as taxable business income but need to be distinguished clearly in your digital accounts. Misclassifying these can inflate taxable income, so proper tagging in your software is key to avoid errors.
Q20: What practical steps can help avoid common MTD registration errors?
A20: The key is to prepare early. Double-check your gross income on past returns to ensure you’re correctly targeted. Choose reliable software, keep digital logs consistently, and if unsure, consult an accountant. Several clients have benefited from a trial run of quarterly submissions before their official start date, easing the transition.
About the Author:
Adil Akhtar, ACMA, CGMA, serves as CEO and Chief Accountant at Pro Tax Accountant, bringing over 18 years of expertise in tackling intricate tax issues. As a respected tax blog writer, Adil has spent more than three years delivering clear, practical advice to UK taxpayers. He also leads Advantax Accountants, combining technical expertise with a passion for simplifying complex financial concepts, establishing himself as a trusted voice in tax education.
Email: adilacma@icloud.com
Disclaimer:
The content provided in our articles is for general informational purposes only and should not be considered professional advice. Pro Tax Accountant strives to ensure the accuracy and timeliness of the information but makes no guarantees, express or implied, regarding its completeness, reliability, suitability, or availability. Any reliance on this information is at your own risk. Note that some data presented in charts or graphs may not be 100% accurate.
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