Who has to comply?

MTD for Income Tax applies to sole traders and landlords whose qualifying income is above a specified threshold. The threshold has been changing as the rollout phases in — HMRC publishes the current limit, and your accountant tracks it for you.

You are likely affected if you:

  • Are self-employed trading above the threshold
  • Receive rental income above the threshold
  • Have a combination of self-employment and property income that crosses the threshold

You are not affected (yet) if you're below the threshold, employed only, a partner in a partnership, or a director of a limited company — though those groups will be brought in over time.

What's changing

Three big changes from the current Self Assessment regime:

  1. Digital record-keeping. Your income and expenses must be kept in digital records using MTD-compatible software.
  2. Quarterly updates. Four short submissions a year to HMRC summarising income and expenses for each three-month period.
  3. End-of-period statement and final declaration. Replaces the traditional Self Assessment tax return.

You'll still pay tax through the same Self Assessment payment cycle — the change is in how you report, not when you pay.

Your pre-April 2026 checklist

  • Choose MTD-compatible software. Bookkeeping software from a recognised vendor handles this automatically. IGI clients get this included with their plan.
  • Move your records into the software. Bank feeds and receipt capture make this painless — spreadsheets and shoeboxes need to migrate.
  • Reconcile a clean opening balance. The clearer your records on day one, the easier each quarter becomes.
  • Sign up for MTD for Income Tax through HMRC when prompted (or let your accountant do it for you).
  • Plan your year-end routine. Quarterly updates aren't tax returns — you still finalise figures at year end. Build that into your workflow.
Already an IGI client?

MTD-compatible software is included in every plan and your accountant handles the quarterly submissions. You don't need to do anything different.

Can I keep using a spreadsheet?

Spreadsheets alone don't meet the requirements. You can keep using one for input if you use "bridging software" that takes the data digitally and submits it to HMRC. In practice, most sole traders find a proper bookkeeping app simpler, cheaper and more accurate.

What if I miss a submission?

HMRC's new points-based penalty regime applies. You accrue a point each time you miss a deadline; once you hit a threshold of points, a financial penalty applies. The system is designed to be fair to the genuinely-forgot-once, but persistent late filers will pay.

Why starting now beats waiting

The businesses that adopt MTD-compatible software early get an immediate compliance dividend — tidy books, real-time visibility of profit, easy VAT (if applicable) and a much cleaner Self Assessment. By April 2026 it's just business as usual.

Waiting until the deadline means doing a panicked records migration alongside the new quarterly rhythm — the worst possible time to introduce two changes at once.

Frequently asked questions

MTD for Income Tax is being phased in from April 2026 for sole traders and landlords with qualifying income above HMRC's threshold. Lower-income taxpayers will follow in subsequent years.

Partnerships are scheduled to be brought into MTD for Income Tax separately. HMRC publishes the latest timing — your accountant tracks this for you.

No. MTD is a change to how you report, not how much tax you pay. Properly kept digital records often reduce tax by ensuring all allowable expenses are claimed.