Making Tax Digital for Income Tax: does it apply to you, and when?

Does Making Tax Digital for Income Tax apply to me?

Making Tax Digital for Income Tax applies to you if you are a sole trader or landlord registered for Self Assessment and your qualifying income from self-employment and property is over the threshold for the tax year HMRC checks. According to GOV.UK, all three of these must be true:

• you are a sole trader or a landlord registered for Self Assessment;
• you get income from self-employment, property, or both;
• your qualifying income is more than the relevant threshold.

Making Tax Digital for Income Tax (often shortened to MTD for Income Tax or MTD ITSA) is not a new tax. It changes how you keep records and report to HMRC: you use compatible software, keep digital records of your business and property income and expenses, send a summary every 3 months, and file your yearly return through the same software.

It does not apply to limited companies, which pay Corporation Tax rather than Income Tax. Partnerships are also outside it for now: GOV.UK says HMRC will set out a timeline for partnerships later. It is separate from Making Tax Digital for VAT, which VAT-registered businesses already use.

If you want a figure for the tax itself, work out your Income Tax and National Insurance with the self-employed tax calculator. MTD does not change the amount you owe.

Making Tax Digital thresholds and start dates

Making Tax Digital for Income Tax started on 6 April 2026 for people with qualifying income over £50,000, and the threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Each start date is set by your income two tax years earlier, taken from the Self Assessment return you have already filed.

The figures are law. Regulation 27 of the Income Tax (Digital Obligations) Regulations 2026 (SI 2026/336), in force from 1 April 2026, sets the qualifying amount at £50,000 for 2024 to 2025, £30,000 for 2025 to 2026, and £20,000 for 2026 to 2027 and every later year. These regulations replaced the 2021 digital requirements regulations.

According to GOV.UK, if your qualifying income is £20,000 or less you are automatically exempt, so the £20,000 line is the permanent floor as the rules stand.

HMRC reviews each return and writes to you if you are over the threshold. GOV.UK is clear that no letter does not mean you are out: it is still your responsibility to check and sign up. From September 2026, HMRC has started signing up people who needed to join for 2026 to 2027 and had not done so themselves, using only the information it already holds.

Qualifying income is turnover, not profit

Qualifying income for Making Tax Digital is your total self-employment and property income before expenses, so a sole trader with £55,000 of sales and £40,000 of profit is judged on £55,000. According to GOV.UK, it is “the amount before expenses (also known as turnover)”, based on the tax return you submitted for the earlier year.

You add every self-employment and property source together. GOV.UK gives the example of £25,000 of rent plus £27,000 of self-employment income: qualifying income is £52,000, over the first threshold, even though neither source is over £50,000 on its own.

Joint owners count only their own share. GOV.UK’s example is a property owned equally with a sibling that brings in £50,000: each owner’s qualifying income is £25,000.

If you started trading part way through a year, HMRC annualises a sole trader’s income where it has the information, so 6 months of trading is doubled. Landlords must annualise their own figure. Transition profits from basis period reform and qualifying care relief do not count.

Worked example: a landlord with a salary and a sole trader on £55,000

A landlord with £22,000 of rent and a £35,000 salary must start Making Tax Digital on 6 April 2028, while a sole trader with £55,000 of turnover had to start on 6 April 2026. Both examples assume the figures stay the same each year and the landlord owns the property alone.

Landlord: £22,000 rent plus a £35,000 job

• Qualifying income is £22,000. The £35,000 salary is PAYE income and does not count.
• 2024 to 2025: £22,000 is not over £50,000, so no MTD from April 2026.
• 2025 to 2026: £22,000 is not over £30,000, so no MTD from April 2027.
• 2026 to 2027: £22,000 is over £20,000, so MTD applies from 6 April 2028.
• First digital records from 6 April 2028; first quarterly update (6 April to 5 July 2028) due by 7 August 2028; the 2028 to 2029 return due through software by 31 January 2030.

The salary still goes on the tax return, which is filed through the software, but no quarterly updates or digital records are needed for it. If the property were owned 50:50 with a spouse, each share would be £11,000 and neither owner would be in, because £11,000 is under £20,000.

Sole trader: £55,000 turnover, £15,000 expenses

• Qualifying income is £55,000, over £50,000 in 2024 to 2025, so MTD applied from 6 April 2026, even though profit is only £40,000.
• The first quarterly update was due by 7 August 2026. On 28 September 2026 the next deadline is 7 November 2026, for the period 6 April to 5 October 2026.
• A late first update gets no penalty point in 2026 to 2027, but all 4 updates must be sent before the 2026 to 2027 return can be filed by 31 January 2028.

The tax bill does not change. Using the site’s self-employed tax calculator with £55,000 income, £15,000 expenses and no salary for 2026 to 2027, profit is £40,000, Income Tax is £5,486 and Class 4 National Insurance is £1,645.80, a total of £7,131.80. If the previous year’s bill was the same, payments on account would be £3,565.90 on 31 January 2027 and on 31 July 2027, exactly as before MTD.

Quarterly updates and the 2026/27 deadlines

A quarterly update is a summary of your self-employment and property income and expenses that your software sends to HMRC every 3 months, and for 2026 to 2027 the deadlines are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. According to GOV.UK, the updates are “summaries, not tax returns”, and HMRC does not see individual receipts or invoices.

Each update is cumulative: it covers everything from the start of the tax year to the end of the period, so you can correct an earlier mistake without resending old updates. You send one update per business, so an electrician who is also a driving instructor sends two, while all your UK rental properties count as one UK property business.

You must still send an update when you had no income and no expenses in the period. You can send it any time after the period ends, or up to 10 days before the end if you expect no more transactions. Calendar periods suit you if your accounts run to 31 March; you must choose them in your software before your first update of the year.

Joint landlords can send income only during the year and add the expenses by resending the fourth update before filing the return.

Digital records: what you have to keep

Under Making Tax Digital you must keep a digital record of each self-employment and property income and expense item in compatible software, and keep those records for at least 5 years after the 31 January filing deadline. Each record needs the amount, the date and a category, using the same categories as Self Assessment.

You do not upload receipts to HMRC. You can create records by linking a bank account, scanning receipts or typing entries in. Landlords can make one record per category for rent received in each update period, so 3 months of £1,000 rent can be one £3,000 record.

If a source has turnover under £90,000, GOV.UK lets you use simpler categorisation, although landlords with residential property still need to split out some expenses. Personal use can be removed with one adjustment: for a £200 phone bill with £75 of private calls, you can record £200 and adjust the category total before filing, rather than editing each item.

If you signed up part way through 2026 to 2027, you must catch up by creating records from the start of the tax year before your first update.

The final declaration is your tax return, due 31 January

At the end of each Making Tax Digital year you submit your tax return through your software by 31 January after the tax year ends, so the 2026 to 2027 return is due by 31 January 2028. Some software and older HMRC material call this the “final declaration”; current GOV.UK guidance calls it submitting your tax return.

Before you file, you make accounting and tax adjustments, claim reliefs and allowances, and add your other income, such as a salary, pension, dividends, savings interest or a partnership share. According to GOV.UK, you still submit one tax return every year and pay your bill as you do now, by 31 January.

Payments do not become quarterly. Balancing payments and payments on account on 31 January and 31 July stay as they were. You can amend a return within 12 months of the filing deadline, using your software.

You must still send a normal Self Assessment return for the year before you join. If you started MTD on 6 April 2026, your 2025 to 2026 return is due the old way by 31 January 2027.

Making Tax Digital software, including free and bridging options

Making Tax Digital for Income Tax needs commercial software that has been through HMRC’s recognition process. According to GOV.UK, you or your agent need software that can create, store and correct digital records, send quarterly updates, and let you add other income and submit your return by 31 January.

There are two kinds:

• Record-keeping software that creates the records itself, by bank feed, receipt scanning or manual entry.
• Bridging software that connects to records you keep elsewhere, such as a spreadsheet, and makes the submissions for you.

GOV.UK says free products are available for people with simple tax affairs, though they may limit the number of transactions. You can use more than one product, for example one for records and another for the return, but only one product per submission. HMRC’s software finder on GOV.UK lists recognised products; HMRC does not recommend any of them.

You can do all of this yourself. An accountant or agent is optional, and an agent can sign you up and submit for you.

Who is exempt from Making Tax Digital

You are exempt from Making Tax Digital for Income Tax if your qualifying income is £20,000 or less, you have no National Insurance number, or HMRC accepts that you are digitally excluded, plus a few other listed cases. Exempt people still file a normal Self Assessment return.

Digital exclusion means it is not reasonable for you to use software because of your age, a health condition or disability, your location stopping any internet access, or religious beliefs incompatible with digital records. There is no exemption for age alone. HMRC will refuse an application whose only reason is that you filed on paper before, do not know accounting software, have few records, or face extra time or cost.

If HMRC already accepted you as digitally excluded for MTD for VAT and nothing has changed, contact Self Assessment general enquiries and it can confirm the same for Income Tax.

Making Tax Digital penalties: the new points system

Making Tax Digital for Income Tax replaces the old late filing fines with penalty points: each missed deadline adds 1 point, and at 4 points you pay a £200 penalty, then another £200 for every further missed deadline. According to GOV.UK, points apply to late tax returns from the year you join and to late quarterly updates from 2027 to 2028 onwards.

There are no penalty points for late quarterly updates in 2026 to 2027. You only get one point per deadline even if several businesses are late. Below 4 points, each point expires 24 months after the missed deadline. Once you reach 4, you clear them all by filing everything on time for 12 months and sending anything outstanding from the previous 24 months.

In your first year, the grace period is 30 days rather than 15. Late payment penalties do not apply to payments on account, but late payment interest still runs from the first day. Agreeing a payment plan with HMRC pauses penalties from the day you contact it.

Opting out once your income falls

You can opt out of Making Tax Digital if your qualifying income stays at or below the threshold for 3 tax years in a row, or if you amend last year’s return and it takes you below the threshold. According to GOV.UK, someone who joined in April 2026 could opt out after 5 April 2029 if their 2026 to 2027 return, 2027 to 2028 return and fourth quarterly update for 2028 to 2029 all show £20,000 or less.

The option appears in your HMRC online services account only when you qualify. If every self-employment and property source stops, tell HMRC before the next tax year starts, or it will sign you up on the information it holds.

What to do now

Check your qualifying income on your last filed return today, because that figure decides your start date.

1. Add up gross self-employment turnover and gross rent (your share only) from your 2025 to 2026 return. Over £30,000 means you start on 6 April 2027.
2. If you should have started on 6 April 2026, sign up on GOV.UK, catch up your records from 6 April 2026 and send your updates before 7 November 2026.
3. Choose software from HMRC’s finder before you sign up, and test it on a month of records.
4. Keep paying tax on the usual dates, and estimate your 2026 to 2027 bill with the self-employed tax calculator so you know what to set aside.