What is Making Tax Digital for Income Tax?

It is HMRC's new way of doing Self Assessment. Sole traders and landlords keep digital records of their income and expenses in MTD-compatible software and send HMRC a summary of income and expenses every three months (a quarterly update). You still submit one tax return each year and pay your tax bill by 31 January, but the return is completed and submitted through your software.

Do landlords have to use Making Tax Digital?

Yes, if your property income is part of your qualifying income and takes you over the relevant threshold. Property income from renting out property counts towards the turnover test, and landlords must keep digital records and send quarterly updates for their property business, just like sole traders do for theirs. If you have both, you keep separate records and send separate updates for each.

Do limited companies need to use Making Tax Digital for Income Tax?

No. Making Tax Digital for Income Tax applies to unincorporated businesses (sole traders) and landlords, not limited companies. A limited company may already need to file VAT digitally under Making Tax Digital for VAT if it is VAT-registered, but Corporation Tax reporting is not part of this change.

What are the quarterly update deadlines?

For the standard update periods that follow the tax year (6 April to 5 April), the deadlines are 7 August, 7 November, 7 February and 7 May. So for the 2026/27 tax year: first update by 7 August 2026, second by 7 November 2026, third by 7 February 2027 and fourth by 7 May 2027.

Can I get an exemption from Making Tax Digital for Income Tax?

Yes, in limited circumstances. HMRC grants some exemptions automatically and others you apply for. They can be permanent or temporary. The main reason to apply is digital exclusion, where your age, disability, health condition or location makes it unreasonable to use compatible software. Practising members of religious societies whose beliefs are incompatible with digital record keeping can also apply.

What happens if I miss a quarterly update deadline?

A points-based penalty system replaces the old late-filing penalties. You get a penalty point for each missed submission, and a financial penalty once you reach a points threshold. For the 2026/27 tax year, HMRC will not apply penalty points for late quarterly updates, but all updates must be sent before you can submit your tax return.

Can I still keep my records in spreadsheets?

Yes. You can keep your digital records in spreadsheets as long as you use bridging software that links your spreadsheet to HMRC and sends the quarterly updates and tax return for you. All software must be compatible with Making Tax Digital for Income Tax, and HMRC keeps a list of recognised products.

August 2026

Making Tax Digital for Income Tax: The UK Guide 2026/27

Q: Who must use Making Tax Digital from April 2026?

Sole traders and landlords whose qualifying income was over £50,000 on their 2024/25 tax return. Qualifying income is your gross turnover from self-employment and property income combined, before expenses. If your 2025/26 return shows over £30,000, you start in April 2027, and over £20,000 on your 2026/27 return means April 2028.

Making Tax Digital is no longer coming. The first cohort of sole traders and landlords has been filing quarterly updates since April 2026. Here is who is in scope, what you must do, and the deadlines that actually apply to you.

29 Aug 2026 · Money Meister · 8 min read

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Quick answer: are you in scope?

Making Tax Digital for Income Tax (MTD for ITSA) applies to sole traders and landlords based on your gross turnover from self-employment and property income combined, taken from the tax return you submitted in the previous tax year.

Over £50,000 on your 2024/25 return: you started 6 April 2026. Over £30,000 on your 2025/26 return: 6 April 2027. Over £20,000 on your 2026/27 return: 6 April 2028. HMRC writes to you when your turn comes.

What is Making Tax Digital?

Making Tax Digital is the government's programme to move UK tax reporting onto digital record keeping. HMRC's stated goal is to modernise the tax system and close the tax gap, the difference between tax that should be paid and tax that actually gets paid.

The programme started with VAT. VAT-registered businesses have kept digital records and filed through MTD-compatible software since 2019, and since 2022 it has applied to all VAT-registered businesses. Income Tax is the second major phase.

The change replaces the once-a-year Self Assessment scramble with a steady rhythm: log your income and expenses as they happen, send HMRC a short summary every three months, and let your software assemble your tax return from those updates at the end of the year. The legal basis is the Income Tax (Digital Obligations) Regulations 2026, which bring the first MTD obligations into effect from April 2026.

Am I in scope? The threshold table

The test is simple, and it is based on the tax return you have already submitted, not a projection. Qualifying income means your total turnover from self-employment and property income, before expenses. Other income, such as bank interest, dividends or employment pay, does not count towards the test.

Tax return	Qualifying income	Start date for MTD
2024 to 2025	more than £50,000	6 April 2026
2025 to 2026	more than £30,000	6 April 2027
2026 to 2027	more than £20,000	6 April 2028

Not in scope: employees who only receive PAYE income, limited companies, and partnerships (for now; HMRC has said partnerships will join the programme at a later date). If you are a partner, your personal share of trading income from self-employment still counts towards the qualifying income test.

The first cohort went live on 6 April 2026. If that is you, your first quarterly update was due by 7 August 2026 and your second is due by 7 November 2026. If HMRC has not contacted you yet, you are probably in the 2027 or 2028 cohort, which gives you time to get ready without a panic.

The four things you must do

1. Use MTD-compatible software

HMRC does not provide the software. You choose it from HMRC's recognised list, or keep using software you already have if your provider confirms it is compatible. If you keep records in spreadsheets, you can carry on, but you will need bridging software to send your updates to HMRC.

2. Create digital records

Every income and expense for your business or property needs a digital record with three things: the amount, the date it was received or paid, and the category. That is it. No scanned receipts required, though an app that snaps receipts as you go makes this painless.

3. Send quarterly updates

Every three months you send HMRC a summary of your income and expenses for each business and property you run. These are totals, not tax returns. If you run both a trade and rental property, you keep separate records and send separate updates for each.

4. Submit your tax return through your software

At year end your software pulls the year's totals together. You check them, add anything else (other income sources, reliefs, capital allowances, Rent-a-Room relief), then submit the return from within the software by 31 January.

If all of this is new to you, our Self Assessment Guide UK covers the filing obligations that MTD builds on top of.

Your first year, deadline by deadline

HMRC has published the exact dates for the first year, assuming you use the standard update periods that follow the tax year. If your accounting period ends on 31 March you can use calendar update periods instead, but the deadline dates below are the same either way.

What to do	By when
Start creating digital records	6 April 2026
First quarterly update	7 August 2026
Second quarterly update	7 November 2026
Third quarterly update	7 February 2027
Fourth quarterly update	7 May 2027
Submit 2026/27 tax return and pay	31 January 2028

One transition note: in your first year using MTD, you still submit your previous year's Self Assessment return (the one prepared before MTD started) the normal way by 31 January. So the first cohort has filed the 2025/26 return as usual, and from January 2028 onwards everything goes through the software.

Every UK tax deadline, including these, is tracked on our UK Financial Events Calendar.

What stays the same

Despite the new machinery, the fundamentals of your tax do not move:

▶You still submit one tax return per tax year and pay your tax bill by 31 January.
▶The quarterly updates are not tax bills. You will not pay four times a year. The updates simply let HMRC (and you) see how the year is shaping up.
▶The tax rules you already know, the rates and bands for 2026/27, reliefs and allowances, all still apply exactly as before. MTD changes the plumbing, not the rates.

If you want to see what those rates do to your money, our UK Tax Calculator and Self-Employed Tax Calculator model your income tax and National Insurance for the current year.

Penalties: the points-based system

The old late-filing and late-payment penalties are being replaced with a points-based system. Miss a quarterly update or a tax return deadline and you get a penalty point rather than an immediate fine. Points build up and a financial penalty triggers once you reach the threshold, which depends on how many updates you are expected to send each year.

Two things are worth knowing. First, a genuine one-off mistake will not sting you: a single late submission costs you a point, not money. Second, for the 2026/27 tax year HMRC will not apply penalty points for late quarterly updates at all. That is a transitional grace period. You still need to send all four updates, because the tax return cannot be submitted until they are in.

Late payment penalties are also changing to be more proportionate: the sooner you pay what you owe, the lower the penalty.

Exemptions from MTD

HMRC grants exemptions either automatically, based on the information it already holds, or on application. They can be permanent or temporary, with temporary exemptions running until April 2027 at the earliest.

The main reason to apply is digital exclusion: it is not reasonable for you to use compatible software because of your age, a disability or health condition, or your location (for example, no reliable broadband or mobile signal). Practising members of a religious society or order whose beliefs are incompatible with digital communications or digital record keeping can also apply.

If you are exempt, you carry on with Self Assessment exactly as before. If your circumstances change, HMRC can review the exemption.

Choosing MTD software

HMRC keeps a list of recognised MTD-compatible products, and everything on it has been through HMRC's recognition process. You can use one all-in-one product for records, updates and the tax return, or combine products. Your choice of software is the single biggest decision in this process, so it is worth comparing fees, bank feed support and whether it handles your specific situation.

Two situations worth flagging. If you are a CIS-registered contractor, you still send monthly CIS returns, and you will include CIS deductions in your quarterly updates; some software handles both, so ask before you buy. And if you are a contractor thinking about incorporation, note that a limited company is out of scope for MTD for Income Tax, which changes the admin burden comparison between sole trader and company status.

If you are not yet in scope, choosing software can wait until HMRC confirms your start date. There is little benefit in paying subscription fees years early, and the recognised list changes over time.

Why it is worth getting right

The honest read is that MTD is an extra admin burden in year one. The useful read is what changes once the system is set up:

▶Your predicted tax bill, all year round. Each quarterly update shows an estimate of what you will owe, so the January payment is a known amount, not a surprise.
▶Up-to-date cash flow. When records are digital and current, you always know where the business stands, which helps planning and pricing.
▶Errors found early. Mistakes in a quarterly update can be corrected in the next one, instead of surfacing during the January rush.
▶No more receipt shuffles. Log transactions as they happen, often by snapping a photo in an app, instead of reconstructing a year of history in January.

For landlords, MTD lands alongside the wider tax picture covered in our Tax on a Rental Property UK guide. For everyone, the practical advice is the same: if HMRC has told you your start date, pick your software and start logging now. If your cohort comes later, use the time to see how the system beds in before you join it.