Making Tax Digital (MTD) for Income Tax is the biggest change to Self Assessment in a generation. It is already live for the first group of sole traders and landlords, and hundreds of thousands more come in over the next two years. This guide explains who is affected, what you have to do, and how to get your records ready before your start date rather than after it.
Who has to use MTD for Income Tax, and when
Whether you are in depends on your qualifying income: your total gross income from self-employment and UK or overseas property, before expenses, in an earlier tax year.
- From 6 April 2026: qualifying income over £50,000 in the 2024/25 tax year.
- From 6 April 2027: qualifying income over £30,000 in the 2025/26 tax year.
- From 6 April 2028: qualifying income over £20,000 in the 2026/27 tax year.
Two points catch people out. First, the test is turnover, not profit: a sole trader with £35,000 of sales and £20,000 of costs is still in from April 2027. Second, self-employment and property income are added together, so a modest business plus a rental flat can cross the line.
The 2025/26 tax year ended on 5 April 2026, so if you are in the April 2027 group, the income that decides it has already been earned. Check it now.
Who is not affected
- Limited companies. MTD for Income Tax is for individuals. A limited company pays Corporation Tax and is not in scope, although its director may be if they also have self-employment or property income.
- Partnerships are not yet included.
- People earning £20,000 or less in qualifying income do not need to use it.
- Some people can apply for an exemption, for example if they are digitally excluded because of age, disability or location.
What changes in practice
- Digital records. You must keep records of business and property income and expenses in software, not in a paper book or an unlinked spreadsheet.
- Quarterly updates. Every three months you send HMRC a summary of income and expenses from your software. Updates are cumulative, so a mistake in one quarter can be corrected in the next.
- The tax return. You still submit a return by 31 January after the tax year ends, now through your software, adding any other income and claiming reliefs.
- Payment dates do not change. Tax is still due on 31 January, with payments on account on 31 January and 31 July where they apply.
Quarterly update deadlines
For the standard quarters of a tax year, the deadlines are:
- 6 April to 5 July: due by 7 August
- 6 July to 5 October: due by 7 November
- 6 October to 5 January: due by 7 February
- 6 January to 5 April: due by 7 May
You can choose calendar quarters (ending 30 June, 30 September, 31 December and 31 March) if they suit your accounts better. The deadlines stay the same.
Penalties
MTD uses a points-based system for late submissions. HMRC is not issuing penalty points for late quarterly updates during the first year, 2026/27, although the usual penalties still apply to late tax returns and late payment. From 6 April 2027 late quarterly updates can earn points, and that easement does not carry over to people who join in 2027 or 2028. If you are in the next group, your first year counts.
Choosing software
You need software that HMRC recognises for MTD for Income Tax. Mainstream bookkeeping packages such as Xero, QuickBooks and Sage support it, and HMRC publishes a list of compatible products on GOV.UK. Bridging software, which sends figures from a spreadsheet, is allowed, but you still need digital links rather than retyping numbers.
The right choice depends on how many transactions you have, whether you have property and trading income, and whether an accountant or bookkeeper will work in the same system.
A six-step plan to get ready
- Confirm your qualifying income for the relevant tax year, adding self-employment and property income together.
- Separate business and personal money. A dedicated bank account makes bank feeds and quarterly figures far easier.
- Pick compatible software and connect your bank feeds.
- Bring your records up to date and agree categories for income and expenses.
- Sign up for MTD for Income Tax with HMRC before your start date, or authorise an agent to act for you.
- Run a practice quarter before the real one, so the first deadline is routine rather than a scramble.
Should you do it yourself or outsource it?
Quarterly reporting turns bookkeeping from a once-a-year job into a monthly habit. If you already reconcile your accounts each month, MTD adds little. If your records are only pulled together each January, it is a real change, and that is where a bookkeeper earns their fee: keeping records current, preparing each quarterly update for you to approve, and handing clean figures to whoever prepares your return.
Read our bookkeeping guide for UK small businesses and monthly bookkeeping checklist, see our bookkeeping and payroll service, or book a free consultation.
Frequently asked questions
When does Making Tax Digital for Income Tax start?
It started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. It extends to those over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028.
What counts as qualifying income for MTD?
Your total gross income from self-employment and property, before expenses, in the relevant earlier tax year. Employment income, pensions and dividends are not included in the test.
Do limited companies have to use MTD for Income Tax?
No. MTD for Income Tax applies to individuals. A limited company is outside it, although a director with separate self-employment or property income may be in scope personally.
Does MTD replace the Self Assessment tax return?
No. Quarterly updates are summaries during the year. You still submit a tax return by 31 January after the tax year ends, and payment dates are unchanged.
Are there penalties for missing a quarterly update?
No penalty points are issued for late quarterly updates in 2026/27. From 6 April 2027 a points-based system applies, and those joining in 2027 or 2028 do not get a penalty-free first year.