MTD for income tax is designed to replace the traditional paper self-assessment system and modernise the way sole traders record and report their income to HMRC. 

According to HMRC, the benefits of MTD include:

• Improved accuracy and financial insight;
• Reduced paperwork and simplified record-keeping;
• A clearer and more timely view of tax calculations; and
• A simplified end of year process

Who Needs to Sign up

You will need to sign up to use MTD for income tax if all of the following apply:

• You are registered for self-assessment;
• You receive income from self-employment, property, or both; and 
• You have ‘qualifying income’ of more than £20,000

Penalties for non-compliance 

MTD introduces a points-based system. Each late or missed deadline results in one penalty point. When you reach the penalty point threshold, you will receive a financial penalty. 

Further information about the penalty system is available on the government website - Penalties for Making Tax Digital for Income Tax volunteers - GOV.UK.