MTD Jargon Buster: A Plain-English Glossary

A

Accounting Period The time period your business uses for recording income and expenses. For most sole traders, this aligns with the tax year (6 April to 5 April). Some businesses use a different period, such as 1 April to 31 March. Your accounting period determines which quarterly periods apply to your MTD reporting.

Agent Services Account A special Government Gateway account that tax agents (accountants, bookkeepers) must set up to manage MTD filings on behalf of their clients. Different from the standard agent Government Gateway account used for Self Assessment.

B

Basis Period The period whose profits are taxed in a given tax year. Since the basis period reform that took effect from the 2024/25 tax year, most sole traders are now taxed on the profits arising in the actual tax year (6 April to 5 April) rather than a previous accounting period. This simplification reduced the complexity of transitional adjustments.

Bridging Software MTD-compatible software that connects your existing spreadsheet or record-keeping system to HMRC's MTD platform. You maintain your own records; the bridging tool handles the digital submission to HMRC. Taxd offers HMRC-recognised bridging software from £6 per month.

C

Calendar Quarters An optional quarterly period type for MTD, where reporting windows align with calendar months (1 April to 31 March, split into quarters starting 1 April, 1 July, 1 October, and 1 January). Available to taxpayers whose accounting period runs from 1 April to 31 March. The alternative is standard quarters.

Compatible Software Any software product that has been approved by HMRC to meet the minimum functionality standards required for MTD for Income Tax. Compatible software must be able to maintain digital records, submit quarterly updates, and facilitate the Final Declaration. See HMRC's Software Choices page for the full list.

D

Digital Link The unbroken electronic connection required between your digital records and HMRC's MTD system. When data moves from your records to HMRC, each transfer must happen digitally -- no manual re-keying is permitted. A spreadsheet that is uploaded directly to bridging software satisfies the digital link requirement. Typing figures by hand from one system into another does not.

Digital Records The electronic records of your business income and expenses that MTD requires you to maintain. At minimum, each record must capture the date, category, and amount. Acceptable formats include spreadsheets and dedicated accounting software. Paper-only records are not acceptable under MTD.

Double Taxation Treaty (DTT) An agreement between the UK and another country that determines how income is taxed when it arises in one country but is received by a resident of another. Relevant for expats and non-residents with UK income. DTTs can provide exemptions or tax credits to avoid paying tax twice on the same income.

E

End of Period Statement (EOPS) A year-end step in the MTD process where you finalise your income and expense figures for each business source (self-employment and property) before completing the Final Declaration. The EOPS is where you claim capital allowances, adjust for private use of assets, and make any other accounting adjustments. Your MTD software handles the EOPS as part of the year-end flow.

F

Final Declaration The MTD equivalent of the annual Self Assessment tax return. Submitted by 31 January following the end of the tax year, the Final Declaration brings together your quarterly update figures, any other income sources (employment, dividends, savings, foreign income), and all applicable reliefs and allowances. It calculates your total Income Tax and National Insurance liability for the year.

Furnished Holiday Let (FHL) A short-term rental property that previously qualified for a special tax regime with enhanced allowances. The FHL regime ended on 5 April 2025. From 6 April 2025, FHL income is treated as standard property income and is included within the property business for MTD reporting purposes.

G

Government Gateway HMRC's online portal for accessing tax services. You need a Government Gateway user ID and password to log in to your Self Assessment account, sign up for MTD, and authorise software to interact with HMRC on your behalf.

Gross Income Your total income before any expenses or deductions are applied. MTD's qualifying income threshold is based on gross income -- not profit.

K

Keptd Taxd's smart bookkeeping tool that connects to your bank account and automatically imports and categorises transactions. Designed for sole traders and landlords who want to automate their record-keeping for MTD, without maintaining a manual spreadsheet. Part of the Taxd product suite.

M

Making Tax Digital (MTD) HMRC's programme to digitise tax reporting in the UK. MTD for Income Tax requires self-employed individuals and landlords above the qualifying income threshold (£50,000 from April 2026, £30,000 from April 2027, £20,000 from April 2028) to keep digital records and submit quarterly updates using compatible software, rather than filing a single annual Self Assessment return.

MTD Exempt A taxpayer status granted by HMRC to individuals who have successfully applied for an exemption from MTD for Income Tax, typically on grounds of religious belief or other exceptional circumstances. MTD Exempt taxpayers retain an annual Self Assessment obligation instead.

N

Non-Resident Landlords (NRL) Scheme HMRC's system for collecting UK tax from landlords who live outside the UK. Under the NRL scheme, letting agents or tenants deduct basic rate tax from rental payments before passing them to the landlord. Non-resident landlords can apply to HMRC to receive rental payments gross if they expect no UK tax liability. The NRL scheme is separate from MTD obligations.

O

OAuth 2.0 The secure industry-standard authorisation protocol used to connect your MTD software to HMRC. When you authorise your software, you are redirected to HMRC's website to sign in and grant permission. HMRC then issues an access token to your software, which is used for subsequent API calls on your behalf.

Obligation A scheduled filing requirement assigned to you by HMRC under MTD. Your obligations include four quarterly updates and one Final Declaration per tax year. HMRC creates these obligations when you sign up for MTD, and your software displays them as deadlines.

P

Penalty Point A mark recorded against your taxpayer record when you miss an MTD submission deadline. Points accumulate: once you reach the threshold (4 points for quarterly filers), a financial penalty of £200 is charged. Points reset after a 24-month period of complete compliance with all returns up to date.

Q

Qualifying Income The income figure HMRC uses to determine whether you are required to join MTD. It is the combined total of your gross sole trader self-employment income and gross UK and overseas property rental income. The thresholds are £50,000 from April 2026, £30,000 from April 2027, and £20,000 from April 2028. Employment income, dividends, savings interest, pension income, and partnership profits are excluded.

Quarterly Update A summary of income and expenses for a business income source, submitted to HMRC every three months through MTD-compatible software. Quarterly updates are not full tax returns -- they are running totals that inform HMRC of your trading activity throughout the year. Final figures and all other income are confirmed in the Final Declaration at year end.

S

SA800 The Partnership Tax Return, submitted annually by the nominated partner to report the partnership's income, expenses, and profit allocation. Partnerships are currently excluded from the MTD for Income Tax framework; the SA800 continues to be filed under the existing Self Assessment system.

Self Assessment HMRC's existing system for reporting income and calculating tax for individuals with income outside PAYE. MTD for Income Tax replaces the quarterly element of Self Assessment for mandated taxpayers, but the Final Declaration at year end functions similarly to the annual SA return.

Sole Trader An individual running a business in their own name (not through a limited company or partnership). Sole trader income is qualifying income for the MTD threshold and is reported through quarterly updates.

Standard Quarters The default quarterly reporting schedule under MTD, where periods align with the tax year: 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, and 6 January to 5 April. The alternative is calendar quarters.

T

Tax Year The UK tax year runs from 6 April to 5 April the following year. The 2026/27 tax year, for example, runs from 6 April 2026 to 5 April 2027. MTD obligations are calculated per tax year.

U

UTR (Unique Taxpayer Reference) A 10-digit reference number issued by HMRC to every taxpayer registered for Self Assessment. Your UTR is required when signing up for MTD and when your software connects to HMRC. It can be found on previous HMRC correspondence or in your online HMRC account.

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