Making Tax Digital for Income Tax is the biggest change to Self Assessment in a generation, and the first group of people it applies to are already in it. If you are a sole trader or a landlord, this is the guide to read before your next tax return.
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Who has to use MTD, and from when
MTD for Income Tax applies to sole traders and landlords. It is being phased in by income level, and the level is tested against a tax return you have already filed:
| You must join from | If qualifying income was over | In this tax year's return |
|---|---|---|
| 6 April 2026 | £50,000 | 2024/25 |
| 6 April 2027 | £30,000 | 2025/26 |
| 6 April 2028 | £20,000 | 2026/27 |
HMRC checks your Self Assessment return each year and writes to you if you are being brought in. That letter is not optional, and it does not wait for you to agree with it — if you think the figure is wrong, you need to deal with it before April rather than after.
Partnerships and limited companies are not in scope yet. If you run a limited company, your corporation tax and company accounts are unaffected by this change — though a director who also has rental income in their own name may still be caught personally.
What "qualifying income" actually means
This is the part that catches people out. Qualifying income is your gross income before expenses — not your profit — from self-employment and property combined.
So a landlord with £28,000 of rent and a small consultancy turning over £24,000 has qualifying income of £52,000, even if the profit after costs is a fraction of that. Employment income, dividends, pensions and savings interest do not count towards the threshold.
The practical effect is that a lot of people who think of themselves as modest earners are in the first wave. If your turnover across all self-employment and rental income was over £50,000 in 2024/25, assume you are in.
What changes day to day
Three things:
- Digital records. Income and expenses have to be recorded digitally, in software, as you go. A shoebox of receipts and a spreadsheet reconstructed each January will no longer meet the requirement.
- Four quarterly updates. Instead of one annual return, you send HMRC a cumulative summary of income and expenses four times a year, straight from the software.
- A final declaration. After the fourth quarter you confirm the year, add anything outside the business (employment, dividends, interest, reliefs) and finalise your tax position. This replaces the Self Assessment return you file today.
The quarterly updates are summaries, not mini tax returns. You are not calculating tax four times a year and you are not paying tax four times a year — payment dates are unchanged. What changes is that the bookkeeping has to be current, all year, rather than caught up in a panic.
The quarterly deadlines
Standard quarters run from 6 April, and each update is due roughly a month after the quarter ends:
| Quarter covers | Update due by |
|---|---|
| 6 April to 5 July | 7 August |
| 6 July to 5 October | 7 November |
| 6 October to 5 January | 7 February |
| 6 January to 5 April | 7 May |
Most software lets you elect for calendar quarters instead (ending 30 June, 30 September, 31 December and 31 March), which is usually easier if your bank statements and invoices already run to month end. The deadlines stay the same.
The final declaration is still due by 31 January after the tax year ends — so for 2026/27, that is 31 January 2028.
Five filing dates a year instead of one. Miss them and you collect points under HMRC's penalty system, which turns into a financial penalty once you hit the threshold. The businesses that will find this easy are the ones whose books are already reconciled monthly.
Software: what counts and what doesn't
You need software that is recognised by HMRC for MTD for Income Tax and can submit updates directly. Xero, which we use with most clients, handles this, and Sage does too. Bridging software can connect a spreadsheet to HMRC, but it is a workaround rather than a solution — the records themselves still have to be digital and linked.
What will not work: a paper cash book, a spreadsheet you retype into HMRC's website, or a folder of PDF invoices with no bookkeeping behind it.
If you are moving from spreadsheets, the honest advice is to move early. Starting in software from 6 April with a clean opening position is far less work than migrating mid-year with two quarters already filed.
Who is exempt
Exemptions are narrow. The main one is digital exclusion — where it is not reasonably practicable for you to use digital tools because of age, disability, location (genuinely poor internet) or religious belief. You have to apply to HMRC for it; you cannot simply decide you qualify.
Being unenthusiastic about software is not an exemption.
Getting ready in four steps
- Check your last return. Add up gross self-employment turnover and gross rental income. Over £50,000 means April 2026; over £30,000 means April 2027.
- Get into software now. Not in March. A few months of using it while nothing is due is what makes the first quarterly update uneventful.
- Separate your bank accounts. A dedicated business account, feeding into the software automatically, removes most of the work. Mixing personal and business spending is what makes quarterly filing painful.
- Decide who is filing. Either you file the updates yourself from the software, or your accountant does. Either works — but agree it before April, not in the first week of August.
Handled properly, MTD is not a burden so much as a forced upgrade. Most clients who move to monthly reconciliation find they knew far less about their own numbers than they thought.
Not sure if MTD applies to you?
We'll check your position, get you set up on software that files properly, and handle the quarterly updates from £50 a quarter.
Book a free 30-minute call →This article is general guidance based on the rules as we understand them at the date above, not advice for your situation. Tax rules change and thresholds are often updated at fiscal events — check the current position on GOV.UK or speak to us before acting on anything here.