Making Tax Digital for Income Tax, explained

Making Tax Digital (MTD) for Income Tax changes how sole traders and landlords keep records and report to HMRC. It began in April 2026 for the biggest earners and is widening each year. This guide covers who is included, from when, and what it actually asks you to do.

✓Checked for 2026/27 — uses the rates for 6 April 2026 to 5 April 2027, last reviewed 27 October 2026.

Who it applies to

MTD for Income Tax applies to individuals who are self-employed, who receive income from property, or both. Whether you are in depends on your qualifying income: your gross self-employment turnover plus your gross property income, added together. "Gross" means before expenses — a landlord collecting £32,000 of rent with £15,000 of costs has £32,000 of qualifying income.

Some income does not count towards the threshold, including:

• wages from a job and pensions;
• dividends and savings interest;
• your share of a partnership's profits (partnerships are not yet included).

If you own property jointly, only your share of the rent counts.

When it starts

HMRC looks at the qualifying income on your tax return from an earlier year to decide when you join:

The income has to be over the figure, so exactly £30,000 does not bring you in from 2027. Once you are in, you stay in unless your income drops below the threshold for several years. Not sure where you stand? The Making Tax Digital checker works it out from your figures, and the landlord calculator includes a quick check for rental income.

What changes in practice

1. Digital records

You must keep records of your business income and expenses digitally, in software that works with MTD or in a spreadsheet linked to HMRC through "bridging" software. Each transaction needs at least a date, an amount and a category. A shoebox of receipts totalled once a year is no longer enough — though you can still keep the paper receipts themselves.

2. Quarterly updates

Four times a year your software sends HMRC a summary of your income and expenses for the quarter. These are totals by category, not a full tax return, and there is no tax to pay at each update. The standard quarters and deadlines are:

You can choose to use calendar quarters (ending 31 March, 30 June and so on) instead; the deadlines stay the same. If you have a business and a property, each one needs its own updates.

3. The final declaration

After the year ends you finalise your figures — adding adjustments, allowances and any other income such as a salary — and submit a final declaration by 31 January. This replaces the old Self Assessment return. Payment dates do not change: the balance and any payments on account are still due on 31 January and 31 July.

What stays the same

• How much tax you pay. MTD changes reporting, not tax rates or allowances.
• Which expenses are allowable, and the choice between expenses and the £1,000 trading allowance.
• The 31 January payment deadline described in our Self Assessment deadlines guide.

Penalties

MTD uses a points-based system for late submissions. Each missed quarterly update or late final declaration adds a point, and a financial penalty is only charged once you reach a set threshold. Points expire after a period of submitting on time. Late payment is handled separately, with interest and penalties on tax paid late. Keeping your records up to date as you go makes the quarterly deadlines straightforward.

Exemptions

Some people can apply to be exempt, for example if age, disability, location or other circumstances mean it is not reasonably practical for them to use digital tools. Exemption is not automatic: you have to apply to HMRC, and you should keep filing as normal until you hear back.

How to get ready

1. Work out your qualifying income for 2024/25, 2025/26 and 2026/27 to see which start date applies to you.
2. Start keeping digital records now, even before you are required to. Moving from a notebook to a spreadsheet during a quiet year is far easier than during your first live quarter.
3. Choose your software. HMRC publishes a list of compatible products, including free options for simpler businesses and bridging tools that connect spreadsheets.
4. Separate your business money into its own bank account if you have not already. It makes categorising transactions much quicker.
5. Put the deadlines in your calendar — four quarterly updates plus the final declaration.

If your income is under £20,000, you are not included under the current timetable, but keeping clear digital records still makes your annual return easier and leaves you ready if the threshold is lowered again.

Estimates only, not tax advice. These figures are a guide based on the information you enter and the 2026/27 rules. Your own position can differ — check GOV.UK or an accountant before relying on them.