Alchemy Financial Solutions — Chartered Accountants

Free Step-by-Step Guide

Making Tax Digital
Signup Walkthrough

A complete guide from eligibility to your first quarterly submission. Tick off each task as you complete it — your progress is saved in your browser.

Overall Progress

Phase 1: Income >£50k → April 2026

Phase 2: Income >£30k → April 2027

Phase 3: Income >£20k → April 2028

🔍

Stage 1 of 7

Confirm Your Eligibility

MTD for Income Tax (MTD ITSA) applies to self-employed individuals and landlords. Confirm whether you are in scope and which phase applies to you.

⚡ Phase 1 deadline: 6 April 2026 — if your income exceeds £50,000

What counts as qualifying income? The total gross income from self-employment (sole trader) plus property rental income. This is before any expenses are deducted. If you run multiple businesses or have rental income alongside self-employment, these are combined.

Stage 1 tasks0 / 5

Confirm you are self-employed and/or a landlord

MTD ITSA applies only to sole traders and property landlords — it does not currently apply to limited companies or PAYE employees.

Calculate your total qualifying gross income

Add together gross self-employment income + gross property rental income. Use your most recent Self Assessment return (SA100) as a guide.

Identify your MTD phase and deadline

Over £50k → 6 April 2026. £30k–£50k → 6 April 2027. £20k–£30k → 6 April 2028. Under £20k → not yet mandated.

Check whether you may qualify for an exemption

HMRC may grant exemptions on grounds of disability, religious objection to computers, or if digital tools are not reasonably practicable for you. Apply via HMRC's exemption process if applicable.

HMRC MTD guidance ↗

Note whether you are already using MTD for VAT

If you are VAT-registered and already using MTD for VAT, you are familiar with the digital record-keeping requirements. MTD ITSA uses a similar approach but covers income tax.

Not sure of your income level? An Alchemy adviser can review your most recent tax return and confirm exactly which phase applies to you and when you need to act.

Stage 1 of 7

🏛

Stage 2 of 7

Set Up Your HMRC Account

You will need a Government Gateway account with Self Assessment enrolled, and you'll need to link it to a compatible software package before signing up for MTD.

📅 Complete before signing up for MTD — ideally 3+ months before your deadline

Already have a Government Gateway account? You still need to check it has Self Assessment enrolled and that your personal details (name, UTR, NI number) are correct and match your tax return.

Stage 2 tasks0 / 6

Create or log in to your Government Gateway account

Go to gov.uk and search "Government Gateway" or "HMRC online services". You will need your Government Gateway user ID and password. If you do not have one, select "Create sign in details".

HMRC Online Services ↗

Ensure Self Assessment is enrolled on your account

Once logged in, check your HMRC online account shows "Self Assessment" as an active service. If not, you will need to enrol — this can take up to 10 working days for an activation code by post.

Confirm your Unique Taxpayer Reference (UTR) is correct

Your UTR is a 10-digit number found on your Self Assessment tax returns or letters from HMRC. Keep it handy — you'll need it throughout the MTD process.

Verify your National Insurance number is on file

HMRC uses your NI number alongside your UTR to identify you. Confirm both appear correctly in your HMRC online account profile.

Update your contact details and email address

HMRC will send MTD notifications and reminders to the email address on your account. Make sure it is current and accessible.

Set up or review your HMRC authorisation for Alchemy (if applicable)

If Alchemy manages your tax affairs, ensure we are authorised on your HMRC account via a 64-8 or HMRC online authorisation. This allows us to sign up for MTD on your behalf.

Using an accountant? Alchemy can complete the HMRC account setup steps and MTD sign-up on your behalf once you have authorised us on your HMRC account.

💻

Stage 3 of 7

Choose MTD-Compatible Software

You must use HMRC-recognised software to keep digital records and submit quarterly updates. You cannot use spreadsheets alone unless they are linked to bridging software.

ℹ Software must be set up before you sign up to MTD — HMRC requires it to be linked at sign-up

What makes software MTD-compatible? It must be able to keep digital records of income and expenses, and submit quarterly updates and the final declaration directly to HMRC via their API. HMRC maintains a list of approved software.

Popular HMRC-approved options

QuickBooks

Self-Employed / Simple Start

From £4/mo

Xero

Starter / Standard

From £16/mo

FreeAgent

Sole Trader / Landlord

From £19/mo

Sage

Accounting Start

From £15/mo

TaxCalc

MTD for ITSA

From £90/yr

Bridging Software

Use with spreadsheets

Various

Stage 3 tasks0 / 4

Choose and subscribe to HMRC-approved MTD software

Select from HMRC's approved software list. If you already use Xero or QuickBooks, check that your current plan supports MTD ITSA submission.

HMRC approved software list ↗

Set up your income and expense categories in the software

Configure the chart of accounts to match your business type. For sole traders, use HMRC's prescribed income/expense categories. For landlords, use the property income categories.

Connect your bank account(s) via open banking feed

Most MTD software supports automatic bank feeds. Connect your business current account and any other accounts used for business transactions to enable automatic import of transactions.

Authorise the software to connect to HMRC

Within your software, find the MTD or HMRC connection settings and authorise the link. You will need to sign in with your Government Gateway credentials to grant access.

Not sure which software is right for you? Alchemy can recommend and set up the most suitable MTD-compatible software for your business type and transaction volume as part of our MTD service.

✅

Stage 4 of 7

Sign Up to MTD for Income Tax

Once your software is connected, you can sign up for MTD ITSA via HMRC's online portal or through your accountant. Sign-up is irreversible — do not sign up until your software is fully configured.

⚠ Do not sign up during a transition period (e.g. January – March before your start date) — wait for guidance from HMRC or your adviser

Important: Once you sign up for MTD, you cannot submit a traditional Self Assessment return for the periods covered. You must use your MTD software for all submissions from your start date onwards.

Stage 4 tasks0 / 5

Confirm your software is fully set up and authorised before signing up

Complete Stage 3 fully before proceeding. HMRC requires software to be linked at the point of sign-up.

Log in to your HMRC online account and navigate to the MTD for Income Tax sign-up page. Alternatively, your Alchemy adviser can do this on your behalf if you have granted agent authorisation.

HMRC MTD sign-up guidance ↗

Confirm your MTD start date with HMRC

HMRC will confirm your MTD start date — this is typically 6 April of the relevant tax year. All records and quarterly submissions must be digital from this date.

Note your four quarterly update deadlines for the year

The four quarterly periods end: 5 July, 5 October, 5 January, and 5 April. Updates must be submitted within one month of each period end (i.e. by 5 Aug, 5 Nov, 5 Feb, 5 May).

Cancel your paper Self Assessment return (if applicable)

If you normally receive a paper SA return, contact HMRC to confirm this will no longer be required. Your MTD submissions replace the traditional return for income tax purposes.

📋

Stage 5 of 7

Keep Digital Records

From your MTD start date, all income and expense records must be kept digitally. HMRC specifies exactly what information must be captured for each transaction.

ℹ Digital records must be kept from your MTD start date (typically 6 April of your phase year)

What must be recorded digitally? For each transaction: the date, amount, category (using HMRC's prescribed categories), and a brief description. Receipts do not need to be kept digitally, but many apps allow photo capture for convenience.

Stage 5 tasks0 / 6

Set up separate income and expense categories for each business

If you have multiple self-employment businesses or both self-employment and property income, each must be recorded separately. HMRC requires distinct records for each income source.

Record all business income transactions digitally as they occur

Every time you receive payment for goods or services, record it in your software with the date, amount, and description. Bank feeds will import most transactions automatically.

Record all allowable business expense transactions

Categorise expenses using HMRC's prescribed categories (e.g. office costs, travel, staff costs, premises costs). Ensure each entry includes date, amount, and category.

Record property income and expenses separately (if landlord)

Property income must be tracked per property or as a portfolio. Record rent received, agent fees, maintenance costs, mortgage interest, and other property-specific expenses.

Reconcile your bank feed regularly — ideally weekly or monthly

Review automatically imported transactions, categorise any uncategorised items, and match bank transactions to invoices or receipts. Regular reconciliation prevents backlogs before quarterly deadlines.

Review HMRC's list of allowable and disallowable expenses

Ensure you understand which expenses are allowable for tax purposes. Common mistakes include claiming personal use items, entertainment, or non-business travel.

HMRC allowable expenses guide ↗

Alchemy tip: Set a recurring diary reminder on the first Monday of each month to spend 30–60 minutes reconciling transactions. This makes quarterly submissions straightforward and takes less than an hour each time.

📤

Stage 6 of 7

Submit Quarterly Updates

Every quarter, you must submit a summary of your income and expenses to HMRC via your MTD software. These are cumulative — each submission includes all figures from the start of the tax year.

📅 Four submissions per year — due within one month of each quarter end

Quarter 1

6 Apr – 5 Jul

Submit by: 5 August

Quarter 2

6 Jul – 5 Oct

Submit by: 5 November

Quarter 3

6 Oct – 5 Jan

Submit by: 5 February

Quarter 4

6 Jan – 5 Apr

Submit by: 5 May

Stage 6 tasks0 / 5

Set calendar reminders for all four quarterly submission deadlines

Add reminders 2 weeks before each deadline: 22 July, 22 October, 22 January, and 22 April. This gives you time to review records before the deadline.

Reconcile and review all records before each quarterly submission

Check all bank transactions are categorised, all income is recorded, and no duplicate entries exist. Your software may flag uncategorised items or anomalies.

Submit your quarterly update via your MTD software

In your software, navigate to the MTD or tax submissions area and select "Submit quarterly update to HMRC." The software will send the summary figures directly to HMRC. You will receive an on-screen confirmation.

Review HMRC's in-year estimate after each submission

After each quarterly update, HMRC will provide an estimated tax liability for the year. This allows you to plan your tax payments in advance and adjust your payment on account if required.

Understand the £200 penalty for late quarterly submissions

Under MTD, late submissions attract a points-based penalty system. After a threshold of points is reached, a £200 fine is charged per missed submission. Staying on top of quarterly deadlines avoids penalties.

Quarterly updates are estimates — not final. You are submitting a summary of income and expenses to date, not a final tax return. Adjustments and corrections can be made in subsequent quarters and in the Final Declaration.

🏁

Stage 7 of 7

Submit the Final Declaration

At the end of each tax year, you must submit a Final Declaration (replacing the traditional Self Assessment return) to confirm your total income, claim any reliefs, and agree your final tax liability.

📅 Final Declaration deadline: 31 January following the end of the tax year — same as the traditional SA deadline

How is the Final Declaration different from a quarterly update? Quarterly updates are just income and expense summaries. The Final Declaration is where you include all other income (employment, dividends, savings, capital gains), claim personal allowances, gift aid, pension contributions, and confirm your total tax liability.

Stage 7 tasks0 / 6

Ensure all four quarterly updates for the year have been submitted

You cannot submit the Final Declaration until all four quarterly updates for the tax year have been received by HMRC. Check your software confirms all four submissions are complete.

Add any additional income not covered by quarterly updates

Include employment income (P60), dividend income, bank interest, pension income, and any capital gains. This information supplements the quarterly figures already submitted.

Claim all applicable reliefs and allowances

Include gift aid donations, pension contributions, marriage allowance, blind person's allowance, trading loss relief, and any other applicable tax reliefs to reduce your final liability.

Review your final tax liability and payments on account

Your software (or HMRC) will calculate your final tax liability. If you make payments on account (twice yearly in July and January), ensure these are correctly reflected.

Submit the Final Declaration via your MTD software by 31 January

Navigate to the Final Declaration section in your software. Review all figures carefully, then submit. You will receive confirmation from HMRC. Late submission carries a £100 automatic penalty.

Pay any outstanding tax by 31 January

Any tax balance due (after payments on account) must be paid by 31 January. Pay via HMRC's online payment service, bank transfer, or direct debit. Interest accrues from 1 February on unpaid balances.

Pay your tax bill ↗

🎉 Well done — you're MTD-compliant

You've completed all seven stages of the MTD signup walkthrough. Repeat stages 5 and 6 each tax year — quarterly updates throughout the year, Final Declaration by 31 January.

Would you like Alchemy to manage your MTD submissions and quarterly reviews on your behalf?

Financial clarity,
expertly crafted

A full suite of
accountancy services

Everything you need,
in one place

Ready to work
with Alchemy?

Enquiry Received

Making Tax Digital
Signup Walkthrough

Confirm Your Eligibility

Set Up Your HMRC Account

Choose MTD-Compatible Software

Sign Up to MTD for Income Tax

Keep Digital Records

Submit Quarterly Updates

Submit the Final Declaration

Get in touch
with our team

Message Sent

Financial clarity,expertly crafted

A full suite ofaccountancy services

Everything you need,in one place

Ready to workwith Alchemy?

Enquiry Received

Making Tax DigitalSignup Walkthrough

Confirm Your Eligibility

Set Up Your HMRC Account

Choose MTD-Compatible Software

Sign Up to MTD for Income Tax

Keep Digital Records

Submit Quarterly Updates

Submit the Final Declaration

Get in touchwith our team

Message Sent

Financial clarity,
expertly crafted

A full suite of
accountancy services

Everything you need,
in one place

Ready to work
with Alchemy?

Making Tax Digital
Signup Walkthrough

Get in touch
with our team