Setting up Making Tax Digital - Income Tax

Making Tax Digital – Income Tax

Making Tax Digital for Income Tax (MTD IT) requires businesses and landlords with qualifying income to maintain digital records and submit quarterly updates to HMRC using approved software such as KEYPrime.

KEYPrime supports the quarterly submission process but does not handle the final declaration, as this stage involves claims, reliefs, and other declarations that form part of your Tax Return. However, all quarterly data entered in KEYPrime can be exported for refinement and final submission by your Accountant using their existing systems.

Preparing for MTD – Income Tax

KEYPrime can process both self‑employment and property income within a single accounting dataset, without creating additional nominal codes. You can continue using your existing structure of Groups, Nominals, Enterprises, and Analysis Codes. Once you have enrolled with HMRC for MTD IT, the correct HMRC tax categories must be applied to each submission entity—or to multiple entities when managing several income streams.

To support your preparation, we provide an Excel MTD_IT Preparation Template (see below) that helps map your current nominal codes to HMRC submission categories. This template covers both Property and Self Assessment businesses. You can transfer your trading nominal codes—such as Sales, Purchases, Fixed Direct Costs, Overheads, and where relevant Valuation Adjustments and Depreciation—into the spreadsheet. Each trading nominal code must be mapped to one of the 18 HMRC Income or Expense categories in line with template guidance, HMRC's notes, or your Accountant’s advice. In v15.0 this can be imported back into the Mappings once agreed. 

Landmark Systems are not tax specialists and cannot advise on how your nominal codes should be categorised. For any queries relating to allocation, please consult your Accountant or Tax Adviser.

If mapping multiple MTD submissions, the same nominal can be assigned to different categories, as transactions are directed to the correct MTD entity using Enterprises or Analysis codes thereafter. See Overview of Mapping for further detail.

Completing this mapping as early as possible will ensure you are fully prepared for your first MTD IT submission in August 2026.

Sign Up with HMRC: Check Your Eligibility First

HMRC has opened enrolment for MTD IT for the 2026/27 tax year. Before signing up, you will need to confirm that you have:

• Been registered for Self Assessment
• Submitted a tax return in the last 2 years

You must also meet the income threshold for your start year.

Setting Up a Taxable Entity

For individuals, MTD IT becomes mandatory from April 2026 for those with more than £50,000 in qualifying income. For these taxpayers, MTD IT replaces the traditional Self Assessment process and becomes the required method of reporting.

Access is granted to Self Assessment, via a new button under the Ledgers menu. 

To enable a new Self Assessment business, select the New option and then in NI Number New

Enter your National Insurance number and follow the instructions for signing into your Government Gateway account (or your Agent Services Account if acting on behalf of a client).

This will allow you to create the Tax Business(s) linked to the National Insurance number provided and then retrieve and complete the obligations when due. The authorisation grant is expected to remain valid for 18 months, similar to the expiry period used for MTD VAT. 

Before you start making submissions you can elect to submit calendar quarters instead of 5th July etc, but due dates remain the same. The election must be made before your first submission is filed and cannot be amended once a submission has been made. 

Each submission shows the cumulative totals for the period(s) so far: 

Q1 – 6th April to 5th July – due 7th August 

Q2 – 6th April to 5th October – due 7th November 

Q3 – 6th April to 5th January – due 7th February 

Q4 – 6th April to 5th April – due 7th May 

Overview of Mapping

Mapping is the process of connecting your existing KEYPrime income and expense nominal codes to the HMRC tax categories required for quarterly submissions. This must be completed for each business type.

Where a company contains more than one Self Assessment Tax Entity (i.e. multiple MTD submissions), each entity requires its own mapping. The same nominal code may be assigned to different HMRC categories, as transactions are subsequently directed to the correct MTD entity using Enterprises or Analysis codes.

Importing your income and expense nominals from the Excel MTD_IT Preparation Template is simple: go to Import, choose your file, and select Open.

KEYPrime allows you to set a default Tax Entity at Nominal Group, Nominal, Enterprise, or Analysis Code level. Where defaults overlap, they are applied in the following priority order:

Analysis → Enterprise → Nominal → Nominal Group

A default set at Analysis level will therefore override settings at all other levels. If the account contains only one Taxable Entity, no defaults are required; simply map each trading nominal code to the appropriate HMRC category.

Submission

Click on Obligations > Retrieve > Click on the required period below  > Transactions

Check to make sure all your income and expenses are mapped correctly i.e. any new nominals you have created in the period. Expand using the + icon.

Ensure the period’s transactions are accurate before hitting Confirm

Review the income and expenditure overall amounts, as HMRC expects quarterly updates to be as accurate as possible, even though you can make corrections later in the year > Submit