MTD for VAT vs MTD for Income Tax UK: What’s the Difference and Which One Applies to You?
This article contains affiliate links. If you purchase software through our links, we may earn a commission at no extra cost to you.
Two Regimes, One Brand Name
Plenty of UK business owners use “MTD for VAT” and “MTD for Income Tax” as though they were two names for the same thing. They are not. They are separate regimes with separate rules, separate deadlines, separate software requirements and separate sign-ups.
Mixing them up has real consequences: missing an obligation you did not know you had, buying software that covers one regime but not the other, or assuming that being signed up for VAT means you are covered for Income Tax. It does not.
This guide sets out what each regime requires, who it applies to, and how to work out which one, or both, applies to you now.
What Making Tax Digital Actually Is
Making Tax Digital is HMRC’s programme to move tax administration onto digital record-keeping and software-based submissions. It is an umbrella term rather than a single set of rules, and the two parts most small businesses meet are MTD for VAT, which has been running for years, and MTD for Income Tax, which went live for its first group of taxpayers on 6 April 2026.
The second of those is still widely called MTD for ITSA. Same thing.
MTD for VAT: The Established Regime
Who It Applies To
Every VAT-registered business in the UK. If you are registered for VAT, you are in, whatever your turnover and whatever your legal structure.
Registration itself becomes compulsory once your taxable turnover passes £90,000 in any rolling twelve-month period, or when you expect to pass it in the next thirty days alone. The deregistration threshold sits slightly lower, at £88,000. Plenty of businesses register voluntarily below £90,000, and MTD for VAT applies to them in exactly the same way.
The regime arrived in stages. VAT-registered businesses above the registration threshold came in from April 2019, with a deferred group of more complex organisations following in October 2019, and every remaining VAT-registered business, including voluntary registrations below the threshold, from April 2022.
What You Have to Do
Keep digital records of your VAT transactions, submit returns through MTD-compatible software rather than HMRC’s old online VAT portal, which closed for return submissions in 2022, and maintain digital links so that figures flow from your source records to the return without being retyped along the way.
That last requirement is the one businesses underestimate. Copying totals from a spreadsheet into another system by hand breaks the chain, even if the numbers are right.
How Often You Submit
Most businesses file quarterly. Some file monthly, usually because they are regularly in a repayment position, and a small number use the Annual Accounting Scheme, which means one return with interim payments across the year. The deadline is one calendar month and seven days after the end of the VAT period.
Software for MTD for VAT
HMRC publishes a list of compatible software. The options UK small businesses use most are QuickBooks, Xero, FreeAgent, Sage and Zoho Books.
FreeAgent is worth singling out for sole traders and freelancers because it is free for NatWest, RBS, Ulster Bank and Mettle business account holders, with the Mettle route requiring at least one transaction a month to stay free. Zoho Books is priced per organisation rather than per user, which changes the arithmetic if more than one person needs access.
If you would rather keep your records in a spreadsheet, bridging software connects the spreadsheet to HMRC and satisfies the digital link requirement without moving to a full cloud package. VitalTax is one option; Coconut sells an MTD Bridging plan at £49.99 a year.
MTD for Income Tax: Live Since April 2026
Who It Applies To, and When
This regime is phased in by qualifying income, and the first phase is already running:
| MTD starts | Qualifying income | Tested on your return for |
|---|---|---|
| 6 April 2026 | More than £50,000 | 2024/25 |
| 6 April 2027 | More than £30,000 | 2025/26 |
| 6 April 2028 | More than £20,000 | 2026/27 |
Qualifying income is gross income from self-employment and property, before any expenses, added together across every business and every let property. It is tested on a return you have already filed, not on a forecast, which is why the April 2027 group are assessed on income they earned during the tax year that ended in April 2026.
MTD for Income Tax does not apply to partnerships or limited companies. Partnerships were always intended to follow, but HMRC has not set a date, and companies are a separate question entirely.
What You Have to Do
Keep digital records of income and expenses through the year, send four quarterly updates, and file a Final Declaration in place of the Self Assessment return. That is five submissions a year rather than one.
There is no End of Period Statement. The original design had one, it was removed following the 2023 Autumn Statement with its functions folded into the Final Declaration, and it never applied to anybody. A lot of guidance published before mandation still lists it, so if you see EOPS mentioned as a live requirement, that guidance is out of date.
The Final Declaration goes through MTD-compatible software rather than HMRC’s existing Self Assessment service, and the deadline is unchanged at 31 January after the end of the tax year.
The Quarterly Deadlines, and Why Updates Are Cumulative
Quarterly updates are due on 7 August, 7 November, 7 February and 7 May, which is one month and seven days after each period ends rather than one month.
The periods themselves are the part that most older guidance gets wrong. Standard periods run 6 April to 5 July, then 6 April to 5 October, then 6 April to 5 January, then 6 April to 5 April. Each update restates the whole year to date rather than covering a fresh three months, so an error in one quarter corrects itself in the next. You can elect for calendar quarters ending 30 June, 30 September, 31 December and 31 March instead, which keeps the same four deadlines.
Software for MTD for Income Tax
HMRC keeps a separate list of software recognised for Income Tax, and it now runs to dozens of products rather than the handful available while the regime was being tested. QuickBooks, Xero, FreeAgent, Sage and Zoho Books all appear on it, alongside specialists built for this regime.
Coconut is one of those specialists, aimed at sole traders and landlords. Its MTD filing plan is £12.99 a month or £129.99 a year and covers both the quarterly updates and the year-end declaration. Its MTD Bridging plan, for spreadsheet users, is £49.99 a year but does not include the year-end declaration, which is a further £49.99 when you need it, so a full year on the bridging route costs £99.98 rather than the headline figure.
The practical point applies whichever product you choose: being compatible for VAT does not make software compatible for Income Tax. Check the Income Tax list specifically, and check whether your existing plan includes it or charges extra.
Side by Side
| Feature | MTD for VAT | MTD for Income Tax |
|---|---|---|
| Tax covered | VAT | Income Tax through Self Assessment |
| Who it applies to | Every VAT-registered business | Sole traders and landlords above the qualifying income threshold |
| Threshold | No MTD threshold of its own; VAT registration is compulsory above £90,000 taxable turnover | Qualifying income above £50,000, £30,000 or £20,000 depending on the phase |
| Mandatory now | Yes, since April 2019 and April 2022 | Yes for the first phase, since 6 April 2026 |
| Submissions a year | Four, or twelve if you file monthly | Five: four quarterly updates plus the Final Declaration |
| Updates cumulative | No, each return covers its own period | Yes, each update restates the year to date |
| Deadlines | One month and seven days after each VAT period ends | 7 August, 7 November, 7 February and 7 May, then 31 January |
| Replaces | VAT online portal submissions | The annual Self Assessment return |
| Separate sign-up needed | Yes | Yes, being in one does not put you in the other |
Being in One and Not the Other
The two regimes test completely different things, so all four combinations exist.
A VAT-registered sole trader turning over £95,000 but with qualifying income below the current phase threshold is inside MTD for VAT and outside MTD for Income Tax, at least until a later phase catches them. A sole trader with £60,000 of qualifying income who is not VAT-registered, perhaps because their work is exempt, is inside MTD for Income Tax and outside MTD for VAT. A VAT-registered sole trader with qualifying income over £50,000 in 2024/25 has been in both since April 2026. And a limited company that is VAT-registered is inside MTD for VAT while sitting outside MTD for Income Tax altogether, though its director may still be caught personally if they have rental income of their own.
Work out each answer separately. Neither regime tells you anything about the other.
Penalties Under Each Regime
Both now use points, and this is where the separation matters most: you hold separate points totals for VAT and for Income Tax, and they do not interact.
For VAT, the points regime replaced the old default surcharge for accounting periods starting on or after 1 January 2023. Each late return earns a point. The threshold is four points for quarterly filers, five for monthly and two for annual, and reaching it triggers a £200 penalty, with a further £200 for each late return after that. Points expire after two years, and the slate resets once you have filed on time for a compliance period and cleared any outstanding returns.
For Income Tax, each late quarterly update earns a point, four points brings a £200 penalty, and each later late submission adds another £200. HMRC gave the first cohort a soft landing for 2026/27, with no points for late quarterly updates, and it is understood that this concession does not extend to those joining in April 2027 or April 2028.
Late payment sits outside both points systems and runs on its own escalating charges plus interest, so filing on time does not protect you if the tax itself is late.
FAQ
I use accounting software for MTD for VAT. Am I ready for Income Tax?
Not automatically. A product can be recognised for VAT without being recognised for Income Tax, and the two sign-ups are separate even where the software handles both. Confirm with your provider that your specific plan supports Income Tax submissions, and confirm with HMRC that you are actually signed up.
What happens if I miss a quarterly update?
You get a penalty point, and four points triggers £200. The exception was the 2026/27 soft landing for the first cohort only. Missing a deadline does not remove the obligation either: outstanding updates still have to be submitted before you can file the Final Declaration.
Do I need separate software for VAT and Income Tax?
Usually not. The major platforms aim to cover both in one subscription, but check whether Income Tax functionality sits in your current plan or costs more, especially if you are on an entry-level tier.
I am a landlord and not self-employed. Does MTD for Income Tax apply to me?
Yes, if your gross rental income is over the threshold for the relevant phase. Landlords follow the same timetable as sole traders, and you will need software that handles property income, not only trading income.
I am VAT-registered. Does that mean HMRC has already signed me up for Income Tax?
No. They are separate registrations. HMRC did begin automatically signing up people who should have joined MTD for Income Tax for 2026/27 and had not, but that is based on qualifying income reported on Self Assessment returns, not on VAT registration.
MTD for VAT vs MTD for Income Tax: The Bottom Line
MTD for VAT is settled: if you are VAT-registered, you are in it, and the only question is whether your records and digital links actually meet the requirement.
MTD for Income Tax is live rather than looming. The first phase started in April 2026, the £30,000 phase follows in April 2027 on income already earned, and the £20,000 phase is due in April 2028. Check your VAT status, work out your qualifying income, and if you are heading into both, pick one package that covers both rather than running two systems.
If your position is genuinely unclear, particularly with several income sources or a business that started part way through a year, an accountant will settle it faster than another evening of reading.
This article is general information about UK tax rules, not advice, and it does not take account of your circumstances. Thresholds, deadlines and penalty rules change, and software plans and prices change more often still. Prices were correct at the time of writing. Speak to a qualified accountant or tax adviser, and confirm current pricing with the provider, before acting on anything here.