How to Sign Up for Making Tax Digital [A Detailed Guide]

Making Tax Digital (MTD) brings one of the biggest changes to the UK tax system in decades. For many small business owners, understanding all the new rules can be a challenge, especially when figuring out how to sign up for Making Tax Digital and what to expect once enrolled.

This guide walks you through everything.

You’ll learn who needs to sign up, when MTD applies to you, what you need before registering, and how to complete the sign-up process. We’ll also explain how to avoid common mistakes and how digital tools can make compliance much easier.

Key points

• MTD will apply to sole traders and landlords based on income thresholds 💰
  Making Tax Digital for Income Tax will be introduced gradually from April 2026. If your combined self-employment and property income exceeds the threshold for the relevant tax year, you’ll be required to sign up.
• You must be registered for Self Assessment 📝
  Before signing up, you need a Government Gateway account, your Unique Taxpayer Reference, and accurate business and income details. These allow HMRC to verify your identity and link your MTD account correctly.
• MTD-compatible software is essential for compliance 🖱️
  You cannot comply with MTD without using HMRC-recognised software. This software allows you to keep digital records, track income and expenses, store receipts securely, and submit updates directly to HMRC.
• MTD makes tax reporting an ongoing process 📅
  Instead of submitting one annual tax return, you’ll submit quarterly updates summarising your income and expenses, followed by a final declaration at the end of the tax year. This spreads your reporting responsibilities across the year and reduces last-minute work.
• Preparing early helps avoid mistakes and makes MTD easier to manage ⏰
  Common problems include signing up too early, choosing unsuitable software, or failing to keep records regularly. Starting on time, using reliable software, and maintaining consistent digital records ensures you stay compliant and avoid unnecessary stress.

What is Making Tax Digital?

Making Tax Digital is HMRC’s long-term initiative to modernise the tax system by replacing manual reporting with digital record-keeping and software-based submissions. The goal is to make tax reporting more accurate, efficient, and manageable throughout the year.

Traditionally, sole traders and landlords have reported their income through Self Assessment by submitting a tax return once per year. This often meant scrambling to find receipts, calculate totals, and correct errors at the last minute.

With MTD, things are done differently. Instead of one annual report, you will:

• Keep digital records of your income and expenses throughout the year
• Submit quarterly updates to HMRC using compatible software
• Confirm your final tax position at the end of the year through a final declaration

This shift turns tax reporting into an ongoing process. While that may sound like more work at first, digital tools actually reduce manual effort by automating calculations and reducing the risk of errors.

Over time, this approach should help business owners stay on top of their tax obligations and avoid surprises when tax payments are due.

Who needs to sign up for Making Tax Digital?

MTD is being rolled out gradually, and the sign-up requirements depend on your income type and level. Sole traders and landlords who report income through Self Assessment are the main group affected at the time.

MTD for Income Tax will apply based on your total gross income from self-employment and property combined. The rollout schedule is currently:

• From April 2026, if your qualifying income exceeds £50,000
• From April 2027, if your qualifying income exceeds £30,000
• From April 2028, if your qualifying income exceeds £20,000

Qualifying income includes:

• Self-employment income from freelance work or running a business
• Rental income from UK property
• Rental income from overseas property

If your income exceeds the relevant threshold, you’ll be required to follow the MTD rules.

However, even if your income is below the threshold, you can still sign up voluntarily. Many business owners choose to do this so they can have more time to prep and improve their record-keeping.

What you need before signing up

Before you register for MTD, make sure a few essentials are in place. Having these at hand will make the sign-up process straightforward and prevent delays.

Government Gateway account

Your Government Gateway account is your secure login for HMRC services. You’ll use it to register for MTD and authorise your software.

If you’ve filed Self Assessment tax returns online, you probably already have one. If not, you can create one on the HMRC website. Make sure you keep your login details safe, as you’ll need them regularly.

Self Assessment registration

To sign up for MTD for Income Tax, you have to be registered for Self Assessment. This ensures HMRC has your taxpayer record and can link your MTD account correctly.

If you’re a new sole trader or landlord, you have to register for Self Assessment first and receive your Unique Taxpayer Reference (UTR) before signing up for MTD.

Your Unique Taxpayer Reference (UTR)

Your UTR is a 10-digit number that identifies you within HMRC’s system.

You can find your UTR on:

• Previous tax returns
• HMRC letters
• Your personal tax account

You’ll need it when signing up and connecting your software.

Your business and income details

You should also have basic information ready, including:

• Your business name and address
• Your National Insurance number
• Details of your self-employment income
• Details of any rental income

Having accurate information ensures your MTD registration is completed correctly.

Step-by-Step: How to sign up for Making Tax Digital

Once you have everything organised, the actual sign-up process is straightforward:

Step 1: Choose your software first

Before registering with HMRC, you should select your MTD-compatible software.

This is important because MTD requires digital record-keeping from the start. Your software will become your primary tool for tracking your income and submitting updates.

Good software should allow you to:

• Track income and expenses easily
• Connect directly to HMRC
• Store digital records securely
• Generate reports automatically

Choosing the right software early ensures a smooth transition and reduces manual work later.

Step 2: Sign up through HMRC

Once your software is ready, you can sign up for MTD through HMRC. You’ll need to log in using your Government Gateway account and confirm your details.

During the sign-up process, HMRC will ask you to:

• Confirm your identity
• Provide your UTR
• Confirm your business income sources
• Confirm that you want to register for MTD

This process usually takes only a few minutes. After submitting your request, HMRC will review your details and confirm your registration.

Approval usually takes up to 72 hours, although it may be quicker in some cases.

Step 3: Connect your software to HMRC

After HMRC confirms your registration, the next step is to connect your software. This step allows it to communicate securely with HMRC and submit updates on your behalf.

The connection process usually involves:

• Logging into your accounting software
• Selecting the option to connect to HMRC
• Signing in with your Government Gateway account
• Granting permission for the connection

Once connected, your software will be authorised to securely submit updates and retrieve information.

Step 4: Start keeping digital records

Once you’re registered and connected, you should start recording income and expenses as they happen, instead of waiting until the end of the year.

Digital records typically include:

• Sales and income
• Business expenses
• Rental income
• Allowable deductions

This step ensures your quarterly updates are accurate and easy to submit.

What happens after you register

After signing up, your tax reporting process becomes more structured and continuous.

Instead of submitting one annual tax return, you’ll submit:

Quarterly updates

Quarterly updates are summaries of your business and property income and expenses, submitted to HMRC every three months using MTD-compatible software.

Each update provides HMRC with a snapshot of your financial activity for that period. Rather than reporting each transaction individually, you’ll report summary totals.

Quarterly updates typically include:

• Total business income for the period
• Total allowable business expenses
• Total property income, if applicable
• Total allowable property expenses

These updates allow HMRC to build an ongoing picture of your tax position throughout the year.

Keep in mind that quarterly updates aren’t full tax returns. They don’t finalise your tax liability, and they don’t require you to make payments at that time. Instead, they help ensure your records are complete and up to date.

Most of the work involved in preparing quarterly updates is handled automatically by your software. As long as your income and expenses are recorded correctly, your software will calculate totals and submit the update directly to HMRC.

This reduces the admin burden and removes much of the manual effort traditionally associated with tax reporting.

Quarterly updates also benefit you as a business owner. By keeping your records up to date, you can better understand:

• How much tax you’re likely to owe
• How your business is performing financially
• Whether you need to set aside additional funds for tax

This visibility helps you make more informed financial decisions and avoid unexpected tax bills.

Final declaration

At the end of the tax year, you’ll file a final declaration. This replaces the traditional Self Assessment tax return and confirms your total income and tax liability for the year.

The final declaration allows you to review your income, make any necessary adjustments, and include additional information that wasn’t part of your quarterly updates.

This may include:

• Additional income sources
• Reliefs and allowances
• Accounting adjustments
• Final confirmation of your income totals

Once submitted, the final declaration confirms your official tax position and determines how much tax you owe.

Because your income and expenses have already been tracked digitally and reported throughout the year, completing the final declaration is typically much simpler than preparing a traditional tax return from scratch.

Your software will use your existing digital records to generate the necessary figures, reducing manual calculations and minimising the risk of errors.

Common problems when signing up for MTD and how to avoid them

While signing up for MTD is usually straightforward, some business owners could encounter issues during the process. Understanding these common problems can help ensure a smooth transition.

• Signing up before your Self Assessment registration is fully active: If you’re newly registered as a sole trader or landlord, HMRC may need time to process your registration and issue your Unique Taxpayer Reference. Attempting to sign up for MTD before this process is complete may result in errors or application rejections.
• Using software that doesn’t fully support your needs: Not all accounting tools offer the same features or ease of use. Some may lack automation, require manual data entry, or make it difficult to maintain accurate records. Choosing reliable, MTD-compatible software designed for sole traders and landlords helps ensure compliance and reduces admin.
• Leaving record-keeping until the last minute: Business owners used to updating records once per year may initially continue this habit by waiting until the last minute to record transactions. Doing so increases the risk of errors and makes quarterly updates more difficult.
• Waiting too long to prep for MTD: Some business owners delay signing up or setting up software until the deadline approaches. This can create unnecessary stress and increase the risk of technical issues. Preparing early gives you time to learn the system and fix any potential problems.

Preparing for Making Tax Digital with ANNA

The key to making MTD work smoothly is choosing software that simplifies the process, not complicates it. After all, the less admin you personally have to handle, the more time you have to focus on your business.

ANNA is built with this exact goal in mind. Designed for sole traders, landlords, and small businesses, ANNA combines a business account, expense tracking, and bookkeeping in one place.

Even better – MTD is free for new and existing ANNA customers. And if you’ve already filed your 2025/26 return with another platform, ANNA will refund the cost when you open an account.

With ANNA, you also get:

• Automatic MTD quarterly updates: Your records are organised automatically and ready to submit each quarter.
• Year-end Self Assessment filing: Submit your final declaration directly to HMRC through the app.
• 2025/26 Self Assessment filed for free: Just connect your HMRC account to unlock it.
• Auto Accountant bookkeeping: Categorise transactions automatically so your records stay in order.
• 24/7 Auto Accountant support: Get clear, jargon-free answers to tax questions whenever you need them.
• Automatic VAT calculations and filing: Calculate your VAT return and submit it to HMRC automatically if you’re VAT-registered.
• Simple invoicing with card payments: Send invoices and accept payments quickly so you get paid faster.
• Personalised tax calendar: Stay on top of deadlines with reminders tailored to your business.
• Payroll for one employee: Easily run payroll with automated PAYE and National Insurance calculations.

Instead of worrying about digital records, quarterly updates, or missed deadlines, ANNA keeps everything organised in one streamlined system. That means less admin, fewer errors, and no last-minute panic at tax time.

So register with ANNA today and get ahead of MTD. And if you ever need help, support is available in the app, 24/7.