When does MTD for Income Tax start?

6 April 2026 for people with combined self-employment and property income over £50,000. April 2027 for those over £30,000, and April 2028 for those over £20,000. The threshold is based on gross income, not profit.

Do I have to send quarterly tax payments under MTD?

No. Payment dates do not change. You still pay tax by 31 January (and 31 July for payments on account). The quarterly updates report your income and expenses to HMRC; they do not trigger a tax payment.

What software can I use for MTD for Income Tax?

HMRC keeps an approved list. In practice most sole traders and landlords use Xero, QuickBooks or FreeAgent. Bridging software lets you keep a spreadsheet, provided the link to the bridging tool is digital and no figures are retyped.

What happens if I miss a quarterly MTD update?

MTD has a points-based penalty system. Each late quarterly update earns a point, and once you hit four points you pay a £200 fine. Late payment penalties are separate and apply on top.

What is Making Tax Digital for Income Tax? A 2026 guide

Q: What is Making Tax Digital for Income Tax?

MTD for Income Tax is HMRC's rule that self-employed people and landlords must keep digital records, send quarterly income and expense updates through compatible software, and submit a final declaration at the end of the tax year. It replaces the annual Self Assessment return for the people it applies to.

Making Tax Digital for Income Tax (MTD ITSA) is the biggest change to how self-employed people and landlords report tax since Self Assessment launched in the 1990s. From April 2026, if your combined self-employment and property income is over £50,000, you will stop filing one annual tax return and start submitting digital quarterly updates instead.

Here is what it actually means, in plain English.

What is Making Tax Digital for Income Tax?

MTD for Income Tax is HMRC's rule that you must:

Keep your income and expense records in HMRC-compatible software (not on paper, not in a plain spreadsheet).
Send HMRC a summary of your income and expenses every three months.
Submit a final declaration at the end of the tax year to confirm the full picture.

It replaces the annual Self Assessment tax return for the people it applies to. You still pay tax on the same dates; you just report the numbers more often.

Who does MTD for Income Tax apply to?

The rollout is staged by income:

From 6 April 2026 if your total gross income from self-employment and property is over £50,000.
From 6 April 2027 if it is over £30,000.
From 6 April 2028 if it is over £20,000.

The threshold is based on gross income (turnover plus rental income), not profit. Two smaller income sources can push you over the line when combined. Employment income and dividends do not count towards the threshold.

Limited companies are not in scope. If you trade through a Ltd, see our post on whether MTD applies to limited companies.

What you actually have to do each quarter

Every three months you send HMRC a summary of your business income and expenses to date. There are four update periods running to 5 July, 5 October, 5 January and 5 April, each with a filing deadline one month later.

You do not calculate the tax at this point. You are just sending the running totals from your software. HMRC uses them to give you a live estimate of the tax you are likely to owe.

At the end of the tax year you submit a final declaration that replaces the old Self Assessment return. This is where you confirm the full year's figures, add anything outside the business (dividends, interest, employment income), claim reliefs, and finalise the tax owed. The payment deadline stays 31 January.

What counts as "compatible software"?

HMRC keeps a list of approved software. In practice most of our clients use Xero, QuickBooks or FreeAgent. Bridging software also exists if you want to keep working from a spreadsheet, but the spreadsheet itself has to link digitally to the bridging tool - no retyping figures.

The important thing is that the digital link runs end-to-end. Copying numbers from a bank statement into a spreadsheet and then into HMRC breaks the chain and puts you offside.

What happens if you ignore it?

MTD has its own penalty regime, separate from Self Assessment. Late quarterly updates earn points, and once you hit the points threshold (four for quarterly filers) you get a £200 fine. Late payment penalties stack on top.

The bigger risk is discovering in March 2026 that your records are not in a format the software can read, then trying to fix a full year of transactions in a hurry.

How to get ready

Three things move the needle:

Get on cloud accounting software now. A year of clean digital records before MTD starts is worth more than any last-minute setup.
Move to monthly bookkeeping. Quarterly filings only work if the underlying records are already up to date. Leaving everything to year-end stops being viable.
Talk to an accountant before April 2026. If you are close to £50,000, the answer to "am I in?" is not always obvious and the decisions about how to structure income are easier to make now than later.

If you would like us to walk through what MTD looks like for your specific setup, get in touch - we handle the software, the quarterly filings and the final declaration as part of our Making Tax Digital package.