If you are self-employed or you let out property, the way you report your income to HMRC is about to change. Making Tax Digital for Income Tax (often shortened to MTD for Income Tax, or MTD ITSA) replaces the single annual Self Assessment return with digital record-keeping and quarterly updates. For the first group of people affected, the start date is 6 April 2026, which is no longer a distant problem on a planning slide.
The change has been delayed more than once, so a fair amount of weariness has built up around it. This time the dates are confirmed in law and HMRC has started writing to people it believes are in scope. If you have had one of those letters, or you think you might be close to the threshold, the sensible move is to understand what is actually being asked of you rather than wait and react. This guide explains who is in, when, what the new routine looks like, and the practical steps that make the switch painless instead of stressful.
MTD for Income Tax is a new way of reporting self-employment and property income to HMRC using digital records and software. Instead of filing one Self Assessment return after the tax year ends, affected taxpayers keep their income and expenses in a digital format throughout the year, send HMRC a summary every quarter, and then confirm the full picture with a final declaration after the year closes.
The aim, in HMRC's words, is to reduce errors and give people a clearer running view of their tax position. The honest summary is that it spreads the admin across the year rather than concentrating it in one January scramble. Nothing about how your tax is calculated changes. The rates, the allowances and the rules for what counts as an allowable expense are the same as they are today. What changes is the cadence: four updates and a final declaration instead of one return.
It helps to be precise about the language. A quarterly update is a running total of your income and expenses for that period. It is not a mini tax return and it does not need to be perfect to the penny, because you can correct figures later. The final declaration is the point where everything is confirmed, other income is added in, and the tax bill for the year is settled.
MTD for Income Tax is being introduced in stages based on your gross income from self-employment and property. The figure that matters is turnover and rent before you take off any expenses, not your profit. This catches a lot of people out, because someone with a modest profit can still be over the line on gross income.
The timetable confirmed by HMRC works in three waves. From 6 April 2026, anyone with combined gross self-employment and property income above £50,000 must comply. From 6 April 2027, the threshold drops to bring in those earning between £30,000 and £50,000. From April 2028, a further group earning between £20,000 and £30,000 is due to join. HMRC uses the income figures from your most recently filed tax return to decide which wave you fall into, which means your 2024 to 2025 return is the one that places you in the first group.
A few categories sit outside the rules for now. Income from employment, dividends and pensions is not part of the MTD calculation, although it still goes on your final declaration. Partnerships have a later, separate timetable. Some people can apply for an exemption, for example where it is not reasonably practical to use digital tools because of age, disability or location. If you are unsure which side of the line you fall on, an accountant who handles Self Assessment can check your last return against the thresholds in a few minutes.
The practical shape of MTD is four quarterly updates plus a year-end final declaration, all submitted through software. The standard quarters run to 5 July, 5 October, 5 January and 5 April, with each update due roughly a month after the quarter ends. You can elect for calendar-quarter dates instead if that suits your bookkeeping better.
Each quarterly update is a cumulative summary of the income and expenses you have recorded digitally for that business or property. Because the figures are cumulative, a mistake in one quarter is simply corrected in the next, so there is no need to panic over an early estimate. You do not pay tax on the strength of a quarterly update. The numbers are informational and help you see your position as the year develops.
After the tax year ends, the final declaration replaces the old Self Assessment return. This is where you bring in everything else: employment income, dividends, savings interest, pension income, reliefs and allowances. You confirm the full picture, the software calculates the tax bill, and the payment deadlines stay where they are now, 31 January for the balancing payment and any payments on account. So the year-end task does not disappear, but it should be lighter because the underlying records are already digital and up to date.
The other shift is record-keeping. Under MTD you must keep digital records of each transaction rather than totting up totals from a carrier bag of receipts once a year. For most self-employed people and landlords this is the part that actually changes day-to-day life, and it is also the part that pays off once it becomes habit.
MTD for Income Tax can only be done through HMRC-recognised software, so the question is not whether to use software but which to use. The market splits into full bookkeeping packages, lighter apps aimed at sole traders, and bridging tools that connect an existing spreadsheet to HMRC.
If you already use accounting software, check whether your provider is on HMRC's recognised list and whether your current plan covers MTD for Income Tax submissions. Many do, and the upgrade is often a setting rather than a new product. If you currently keep everything in a spreadsheet, you have two routes: move to a recognised app, or keep the spreadsheet and add bridging software that pushes the figures to HMRC in the right format. A spreadsheet on its own, with no digital link to HMRC, will not meet the rules.
The right choice depends on volume and complexity. A landlord with two properties and a handful of transactions a month needs something very different from a tradesperson invoicing daily and tracking materials, mileage and subcontractors. There is no single best package, only the one that matches your transaction pattern and the way you already record things. A short conversation with your accountant before you commit usually saves money, because the wrong tool either costs too much or fails to capture what you need. You can read more about how we support small businesses and the self-employed when it comes to choosing and setting up the right system.
MTD comes with a points-based penalty regime for late submissions. You receive a point each time you miss a deadline, and once your points reach the threshold for your filing frequency you get a financial penalty. The points-based design is more forgiving than a flat fine for a single slip, because points expire after a sustained period of compliance, but a pattern of missed updates will cost money. Late payment of the tax itself carries separate interest and penalties, exactly as it does now.
The most common way people get caught out is not malice or even disorganisation. It is leaving the switch until the quarter has already started, then discovering the software is not set up, the records are not digital, and the first deadline is weeks away. The fix is preparation, and it is genuinely straightforward if you start early.
Three practical steps cover most of it. First, confirm which wave you are in by checking your last return's gross income against the thresholds. Second, choose and set up recognised software before the relevant April, and run a month of real transactions through it so the routine is familiar before it counts. Third, decide who actually does the quarterly updates, you or your accountant, and put it in the calendar. Spreading the work across the year is the whole point of MTD, and it only feels like a burden if it is ignored until the deadline. Handled properly, the quarterly rhythm tends to make the year-end far calmer than the old January rush.
(Tax treatment depends on individual circumstances and may change in future.)
MTD for Income Tax starts on 6 April 2026 for sole traders and landlords with combined gross income over £50,000. A second group, those earning between £30,000 and £50,000, joins from 6 April 2027. A third group, between £20,000 and £30,000, is due to follow from April 2028.
Yes. MTD for Income Tax requires HMRC-recognised software that can keep digital records and submit quarterly updates. A spreadsheet on its own is not enough unless it connects to HMRC through bridging software. Your accountant can tell you which package fits how you already work.
The threshold is based on your gross income from self-employment and property before expenses, not your profit. HMRC looks at the figures in your most recent submitted tax return. If your turnover plus rental income tops £50,000, you are in the first group even if your taxable profit is much lower.
MTD uses a points-based penalty system. You get a point for each missed deadline, and once you reach the threshold for your filing frequency you receive a financial penalty. Points expire after a period of compliance, so an isolated slip is recoverable, but repeated misses add up.
No. MTD changes how and when you report, not the rules for working out what you owe. Your tax bill is calculated the same way it is now. The change is the rhythm of record-keeping and the move from one annual return to quarterly updates plus a final declaration.
MTD for Income Tax is a change of routine, not a change of rules. The people who find it hardest are the ones who wait for a deadline to force the issue; the people who find it easy are the ones who set up their records and software a few months early and let the quarterly rhythm become a habit. If you are over the £50,000 threshold you have a fixed date to work towards, and the work to prepare is modest if you start now. The official detail lives on the GOV.UK Making Tax Digital pages, and if you would rather someone simply checked where you stand and handled the setup, that is the kind of thing we do every week.