What is MTD? Making Tax Digital Meaning Explained

If you've received a letter from HMRC about "Making Tax Digital" (MTD), you might be wondering what it actually means for you. The official government guidance can be dense and full of jargon.

Let's break it down into plain English.

The Short Version

Making Tax Digital is HMRC's plan to digitize the UK tax system. For decades, you've likely kept your receipts in a shoebox or a simple ledger, and filled out one big Self Assessment tax return at the end of the year.

MTD changes that. Instead of one annual return, you will need to:

1. Keep your business records digitally.
2. Send a summary of your income and expenses to HMRC every three months.
3. Submit a final declaration at the end of the year.

Who Does MTD Affect?

Starting in April 2026, MTD for Income Tax (often called MTD ITSA) will apply to:

• Self-employed individuals (sole traders).
• Landlords.
• Anyone whose combined income from self-employment and property is over £50,000 a year.

If you earn under £50,000, you don't have to join yet, but the threshold is expected to drop to £30,000 in April 2027.

What Does "Digital Records" Mean?

This is where many people get confused. Software companies will try to tell you that "digital records" means you must buy their expensive accounting software.

How Do I Send Quarterly Updates?

You cannot just email your spreadsheet to HMRC, and the old web portal where you typed in your numbers is being retired.

Instead, you must use compatible software to send your data. If you use a spreadsheet, you can use a simple, low-cost tool called "bridging software." It takes the totals from your spreadsheet and securely bridges the gap to HMRC's systems.

We Keep It Simple

At Abridge, we believe tax shouldn't be complicated. We provide simple, jargon-free bridging software that lets you keep using your spreadsheet while staying fully compliant with HMRC's new rules.