QuickBooks Making Tax Digital (MTD) for Income Tax: UK Guide + Deal

What is MTD for Income Tax?

Making Tax Digital (MTD) is HMRC's programme to move tax records and returns online. It started with VAT in 2019. MTD for Income Tax now extends it to self employed people and landlords who file Self Assessment.

Under MTD for Income Tax you must:

• Keep digital records of your business and property income and expenses.
• Use HMRC recognised software, such as QuickBooks.
• Send a quarterly update to HMRC every three months.
• Submit a final declaration by 31 January after the tax year ends.

MTD for Income Tax timeline

The mandate is based on qualifying income from self employment and property. Qualifying income is your total gross income from self employment and property, before expenses. A self employed plumber turning over £35,000 who also lets a flat for £12,000 a year has £47,000 of qualifying income, so would join from 6 April 2027.

How quarterly updates work

Each quarterly update is a summary of income and expenses for the period. It is not a tax return and no tax is paid at that point. The standard quarters run to 5 July, 5 October, 5 January and 5 April, with each update due a month after the quarter ends.

In QuickBooks, your bank transactions flow in automatically and you categorise them as you go. When a quarter closes, QuickBooks builds the summary and you submit it to HMRC in a few clicks. You can see your estimated tax bill update after each quarter.

The final declaration

After the tax year ends, you confirm your figures, add any other income such as employment or dividends, and submit a final declaration. This takes the place of the traditional Self Assessment return. The deadline is still 31 January.

Which QuickBooks plans are HMRC recognised and MTD ready?

For most sole traders and landlords, Sole Trader Plus is the right plan. VAT registered businesses need Simple Start or higher because Sole Trader Plus cannot file VAT returns. Our QuickBooks sole trader guide covers this in detail.

QuickBooks for landlords

Landlords are in scope for MTD for Income Tax in exactly the same way as the self employed. If you let property in your own name and your rental income, alone or combined with self employment income, passes the threshold, you need MTD software.

QuickBooks lets you record rent received, letting agent fees, repairs, insurance, ground rent and service charges. You can tag transactions by property so you know which one is making money. Jointly owned property is reported by each owner for their share.

Landlords operating through a limited company are not in MTD for Income Tax; the company pays Corporation Tax instead. They would typically choose Simple Start or Essentials, which you can compare on our QuickBooks pricing page.

QuickBooks and Self Assessment

If you are below the MTD threshold, you still file a normal Self Assessment return. QuickBooks helps by grouping your income and expenses into HMRC's categories and estimating your Income Tax and National Insurance through the year. Many people choose to start using MTD style records early so the switch is painless when their threshold arrives.

What about CIS and payroll?

Construction subcontractors can record CIS deductions in QuickBooks so they count towards their tax. If you employ staff, RTI payroll reporting is handled by the separate payroll add on, covered in our QuickBooks Payroll UK guide.

How to get ready for MTD with QuickBooks

1. Check your qualifying income from your last Self Assessment return.
2. Claim the QuickBooks 90% discount on Sole Trader Plus or Simple Start.
3. Connect your business bank account so transactions flow in daily.
4. Sign up for MTD for Income Tax through your HMRC online account.
5. Authorise QuickBooks to talk to HMRC, then submit each quarter.

A landlord's MTD quarterly workflow in QuickBooks

Here is how a typical landlord with two buy to let flats might run a quarter in QuickBooks once MTD for Income Tax applies to them.

1. Daily, automatically: rent from the letting agent and outgoings such as mortgage payments and repairs arrive through the bank feed.
2. Weekly, ten minutes: categorise each line as rent, agent fees, repairs, insurance or finance costs, and tag it to Flat 1 or Flat 2.
3. Receipts: photograph invoices from tradespeople as they arrive. QuickBooks matches them to the payment.
4. Quarter end: review the property income summary. Check the agent's statement agrees with gross rent and fees in QuickBooks.
5. Submit: send the quarterly update to HMRC from QuickBooks. No tax is paid at this point.
6. After the tax year: add any other income, review finance cost restrictions, and submit the final declaration.

Mortgage interest for individual landlords is not deducted as an expense; it gives a basic rate tax credit instead. Record it in its own category so your accountant or the final declaration treats it correctly.

A self employed quarterly workflow

For a sole trader the rhythm is the same, with different categories. Sales invoices raised in QuickBooks are matched when paid, card spending is categorised, mileage is logged by the app and CIS deductions are recorded from statements. At each quarter end you review the self employment summary and submit.

Mixed income: self employed and landlord

Many people have both. Remember the mandate is based on qualifying income from self employment and property combined. A gardener earning £26,000 who also receives £8,000 rent has £34,000 of qualifying income, so would be in scope from 6 April 2027 on current rules. QuickBooks keeps the two income sources separate so each quarterly update is accurate. Confirm your own position on GOV.UK.

MTD costs on QuickBooks, worked out

The cheapest HMRC recognised QuickBooks plan for MTD for Income Tax is Sole Trader Plus. On the deal, the first 6 months cost £1 a month + VAT, then £10. That makes your first MTD year £66 + VAT. If you also need MTD for VAT, Simple Start costs £105.60 + VAT in year one.

MTD mistakes to avoid

Waiting for your threshold year

Starting a year early gives you four practice quarters. When the mandate arrives, your categories and bank rules are already set.

Reporting net rent from the agent

Record gross rent and agent fees separately. Net figures understate income and expenses, and can push you the wrong side of a threshold calculation.

Choosing a plan without VAT when you need it

A VAT registered landlord, for example with commercial property opted to tax, needs Simple Start or higher because Sole Trader Plus does not submit VAT returns.