May 22, 2026
9 Min Read
If you are self-employed or you let out a property, a letter from HMRC about Making Tax Digital has either landed already or is on its way. It is one of the biggest changes to how income tax works in a generation, and the wording can make it sound far more alarming than it is.
The short version: the way you report your income to HMRC is changing. Instead of one annual Self Assessment return, you will keep digital records and send updates through the year. The deadlines move from once a year to every few months. Nothing about how much tax you owe changes because of MTD itself. What changes is the rhythm of the paperwork.
This guide explains what Making Tax Digital for Income Tax actually is, who has to do it and when, what the new quarterly routine looks like in practice, and the steps to get ready without the last-minute panic. It is written for the people most affected first: sole traders and landlords. If you would rather hand the whole thing over, that is what our accountancy team is for, but you should understand the change either way.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax (often shortened to MTD for ITSA, or MTD for Income Tax Self Assessment) is a government programme that moves income tax reporting online and spreads it across the year. It applies to income from self-employment and from property.
Under the old system, you file one Self Assessment return after the tax year ends, with a deadline of 31 January. Under MTD, you keep digital records of your income and expenses, send HMRC a summary every quarter using compatible software, and then make a final declaration that pulls the year together. The single annual return is replaced by five touchpoints: four quarterly updates and one final declaration.
Two things are worth saying plainly. First, MTD does not change your tax bill. The rules on what is taxable, what you can claim, and the rates you pay are unaffected. Second, the quarterly updates are running totals, not five separate tax bills. You still pay your income tax on the usual dates. The updates are about reporting, not paying.
The aim, from HMRC's side, is fewer errors and a closer-to-real-time picture of what people owe. From your side, the practical effect is that bookkeeping stops being a once-a-year scramble and becomes a quarterly habit.
Who has to do MTD for Income Tax, and when?
MTD for Income Tax is being introduced in stages, based on your qualifying income. Qualifying income means your gross income from self-employment and property added together, before expenses.
The first stage starts on 6 April 2026. From that date, sole traders and landlords with qualifying income above £50,000 must follow the MTD rules. The second stage starts on 6 April 2027 and brings in those with qualifying income above £30,000. The government has confirmed a further stage from April 2028 for those above £20,000.
A few details catch people out. The threshold is based on gross income, not profit, so a landlord with high rent but a large mortgage can still cross the line. The figure is tested against a previous tax year's return, so HMRC works out who is in scope from records you have already filed. And if you have both a trade and a rental property, the two are combined to test the threshold, even though you report them as separate businesses inside MTD.
If your income sits below the threshold for now, you do not need to act yet, but it is worth knowing the line is moving down each year. Many people who are out of scope in 2026 will be in scope by 2028. Building the habit early makes the eventual switch painless. Our small business accounting service can confirm exactly which stage applies to you.
What does the quarterly routine actually look like?
This is the part that worries people most, and it is less dramatic than it sounds. A quarterly update is a summary of your income and expenses for that quarter, sent to HMRC through your software. It is not a mini tax return and it does not require you to finalise anything.
The standard quarters run from 6 April, with update deadlines roughly a month after each quarter ends: 7 August, 7 November, 7 February and 7 May. There is also an option to align quarters to calendar months if that suits your records better. Each update is, in practice, a few clicks once your bookkeeping is up to date, because the software adds up the figures you have already recorded.
After the fourth quarter, you complete a final declaration. This replaces the old annual return. It is where everything else gets accounted for: other income, reliefs, allowances, and any adjustments. The deadline for the final declaration is 31 January, the same date Self Assessment uses now, so the year-end deadline you already know does not move.
The honest takeaway is that MTD rewards keeping on top of your records and punishes leaving everything to January. If your books are current, the quarterly updates are quick. If they are a shoebox of receipts, the new rhythm forces a habit that, frankly, makes the whole year easier.
What software do you need?
MTD requires you to keep digital records and to file through HMRC-compatible software. A spreadsheet alone is not enough on its own, although bridging software can connect a spreadsheet to HMRC if you prefer to keep working that way.
HMRC publishes a list of compatible software, and the choices range from simple, low-cost apps for straightforward affairs to full bookkeeping packages that handle invoicing, bank feeds and expense tracking. The right choice depends on how complex your records are and how much you want to do yourself. A landlord with one property has very different needs from a tradesperson running a busy sole trade with dozens of suppliers.
The key requirement is that your records are kept digitally and that the data flows to HMRC without manual re-typing. That digital link is the bit the rules care about. Many accountants, including ours, include compatible software inside an existing fee, so the cost is not always an extra line on top.
How to get ready for MTD without the panic
Getting ready is mostly about doing four things early rather than late.
1. Confirm whether and when you are in scope
Add up your gross self-employment and property income and check it against the thresholds and dates above. If you are close to a threshold, get a professional view, because crossing the line by a small margin still brings you into the rules.
2. Choose your software now, not in March
Picking a tool early means you can learn it while the stakes are low. Set up your bank feed, get used to recording expenses as you go, and you will start your first MTD quarter already comfortable.
3. Move your record-keeping to a quarterly habit
The single biggest stress-reducer is to stop saving everything for the end of the year. Reconcile monthly, photograph receipts as they happen, and the quarterly updates become routine rather than a deadline.
4. Decide how much you want to hand over
Some people will run MTD themselves with the right software. Others will want an accountant to handle the quarterly updates and the final declaration entirely. Both are valid. The point is to decide deliberately rather than drift into the deadline. If you are weighing up the move, our team can take the whole cycle off your hands, or simply set you up to do it yourself.
For business owners, MTD is also a natural moment to look at the wider picture. If your turnover is rising toward the threshold, it may be near other milestones too, such as VAT registration or the question of whether switching from sole trader to a limited company suits you better. The same conversation that sorts your MTD readiness can sort those at the same time.
(Tax treatment depends on individual circumstances and may change in future.)
Frequently asked questions
When does MTD for Income Tax start?
MTD for Income Tax starts on 6 April 2026 for sole traders and landlords with qualifying income above £50,000. It extends to those above £30,000 from 6 April 2027, and the government has confirmed it will reach those above £20,000 from April 2028.
Who is exempt from MTD for Income Tax?
People with qualifying income below the threshold for their tax year are not yet required to join. Some groups can apply for exemption, including those who cannot use digital tools because of age, disability, location or religious grounds. HMRC decides each exemption case individually.
Do I still file a Self Assessment tax return under MTD?
The annual Self Assessment return is replaced by quarterly updates plus a final declaration. The final declaration confirms your figures for the year and is where other income, reliefs and allowances are accounted for, so it does a similar job to the old return.
How much does MTD-compatible software cost?
Costs vary widely. Some providers offer free or low-cost tools for simple affairs, while fuller bookkeeping packages run to a monthly subscription. HMRC keeps a list of compatible software, and your accountant can usually include the right tool within an existing fee.
What happens if I miss an MTD quarterly update?
HMRC operates a points-based penalty system. You receive a point for each missed deadline, and a penalty applies once you reach the threshold for your filing frequency. Points can expire after a period of compliance, so a single late update is not usually a disaster if you get back on track.
Making Tax Digital is a change of rhythm, not a change of rules. The tax you owe is the same; the difference is that reporting becomes a quarterly habit instead of an annual scramble. The people who find it easiest are the ones who get their software and their record-keeping sorted well before their start date, rather than meeting the first deadline cold. Whether you plan to run it yourself or hand it over entirely, the time to get ready is now, while there is room to learn without pressure.
