Making Tax Digital for Income Tax is the largest change to how the self-employed and landlords report to HMRC since Self Assessment was introduced in the 1990s. It replaces the single annual tax return with digital record keeping and quarterly updates sent from software, phased in by income level from April 2026. This guide explains who is affected and when, what the obligations actually are, how the penalties work, who can be exempt and what to do before your start date.
The thresholds and dates
MTD for Income Tax applies to individuals with qualifying income from self-employment and UK or overseas property. Qualifying income is gross income before expenses from those sources combined, and it is measured on the tax return two years before the start year.
- From 6 April 2026: qualifying income over £50,000 on the 2024/25 return.
- From 6 April 2027: qualifying income over £30,000 on the 2025/26 return.
- From 6 April 2028 (announced, not yet in legislation at the time of writing): qualifying income over £20,000 on the 2026/27 return.
Below £20,000 there is currently no requirement. Employment, pension, dividend and savings income do not count towards the threshold, though they are reported in the final declaration. Partnerships and companies are not yet in scope; a partner's partnership income does not count towards the threshold, but their own self-employment and property income does.
If you are already above the threshold for your start year, HMRC will have written to you. If you cross the threshold in a later year, you join from the April after the return that shows it, so a sole trader whose 2026/27 return shows £35,000 joins in April 2029 under the £30,000 rule, or April 2028 under the £20,000 rule if that is enacted.
What you must do
Three things. First, keep records of each business and property income source digitally in software that meets HMRC's standard, recording transactions as they happen rather than summarising later. A spreadsheet is acceptable only with bridging software that links it digitally to HMRC; copying and pasting totals is not a digital link.
Second, send HMRC a quarterly update for each income source, giving cumulative totals of income and expenses by category for the tax year so far. The updates are due by 7 August, 7 November, 7 February and 7 May, covering the quarters to 5 July, 5 October, 5 January and 5 April. No accounting adjustments, no tax calculation and no payment accompany them. Because they are cumulative, an error in one quarter is corrected in the next.
Third, submit a final declaration by 31 January after the tax year, bringing in adjustments, capital allowances, reliefs and all your other income, and confirming the year's figures. This replaces the Self Assessment return. Tax payment dates do not change: 31 January for the balancing payment and first payment on account, 31 July for the second.
Penalties
A points-based system replaces the old fixed penalties for those in MTD. Each late quarterly update or final declaration earns a point; when the points reach four, a £200 penalty is charged, and further late submissions attract £200 each until a period of full compliance resets the count. Late payment is penalised separately at 3% of the unpaid tax after 15 days, a further 3% after 30 days and 10% a year thereafter, with interest from the due date. HMRC has described the first year as a period where it will take a light-touch approach to points, but the points still accrue.
Exemptions
You can apply to HMRC to be exempt if it is not reasonably practicable for you to use digital tools because of age, disability, location or another reason, or if you are a practising member of a religious society whose beliefs are incompatible with electronic communication. Exemption must be applied for and granted; it is not automatic. Trustees, personal representatives of deceased persons and non-resident companies are outside scope. Once in MTD you remain in unless your qualifying income falls below the threshold for three consecutive years, after which you can apply to leave.
Jointly owned property
Landlords who own property jointly can report only their share of the income each quarter and bring in expenses at the final declaration, which simplifies the quarterly updates considerably. Each joint owner is assessed separately against the threshold on their own share.
Preparing
The practical steps are to confirm your start date from the right year's return, choose MTD-compatible software, connect bank feeds so transactions are captured automatically, set up expense categories that map to HMRC's reporting lines, authorise the software with HMRC, and start keeping records digitally before the start date rather than after it. The quarterly deadlines then follow naturally from records that are already up to date. Businesses that have been keeping a shoebox of receipts and a year-end spreadsheet face the biggest change, and for most of them the answer is monthly bookkeeping in software.
Getting help
Our MTD readiness check at £99 confirms your start date in writing, sets up the software and the mapping, and walks you through day-to-day capture. Quarterly submissions from your records are from £35 a quarter, and the full MTD service from £299 a year replaces the traditional Self Assessment fee with the quarterly updates and the final declaration included. For those who would rather not keep the records at all, our bookkeeping service does the recording and the submissions follow from it. Use the deadline finder to see the quarterly dates alongside your other obligations.
A worked example
A self-employed electrician with turnover of £62,000 and a rental flat bringing in £9,000 a year had qualifying income of £71,000 on his 2024/25 return. He joined MTD for Income Tax on 6 April 2026. He now keeps both the trade and the property in cloud software with the bank feed connected, photographs receipts as they arrive, and sends two quarterly updates each quarter, one for each source, by 7 August, 7 November, 7 February and 7 May. The first update, for the quarter to 5 July 2026, was due by 7 August 2026 and showed cumulative income and expenses by category; the fourth, to 5 April 2027, is due by 7 May 2027. His final declaration for 2026/27 is due by 31 January 2028, when it will bring in his capital allowances on a new van, his pension contributions and the finance-cost credit on the flat's mortgage, and his tax is payable on the usual dates.
His wife, a part-time consultant with £24,000 of self-employment income and no property, is below every threshold announced so far and continues to file a Self Assessment return, though she expects to join in April 2029 if the £20,000 threshold is enacted and her income stays where it is.
What has not changed
The tax itself, the rates, the allowances, the payment dates, the expenses you can claim and the records you must keep by law are the same as before. MTD changes how and how often you report, not what you owe. Businesses that already kept monthly digital records have found the transition to be a matter of pressing a button four extra times a year; those that did not have had to change their habits, which is the part that takes time.
A worked example
A self-employed electrician with turnover of £62,000 and a rental flat bringing in £9,000 a year had qualifying income of £71,000 on his 2024/25 return. He joined MTD for Income Tax on 6 April 2026. He now keeps both the trade and the property in cloud software with the bank feed connected, photographs receipts as they arrive, and sends two quarterly updates each quarter, one for each source, by 7 August, 7 November, 7 February and 7 May. The first update, for the quarter to 5 July 2026, was due by 7 August 2026 and showed cumulative income and expenses by category; the fourth, to 5 April 2027, is due by 7 May 2027. His final declaration for 2026/27 is due by 31 January 2028, when it will bring in his capital allowances on a new van, his pension contributions and the finance-cost credit on the flat's mortgage, and his tax is payable on the usual dates.
His wife, a part-time consultant with £24,000 of self-employment income and no property, is below every threshold announced so far and continues to file a Self Assessment return, though she expects to join in April 2029 if the £20,000 threshold is enacted and her income stays where it is.
What has not changed
The tax itself, the rates, the allowances, the payment dates, the expenses you can claim and the records you must keep by law are the same as before. MTD changes how and how often you report, not what you owe. Businesses that already kept monthly digital records have found the transition to be a matter of pressing a button four extra times a year; those that did not have had to change their habits, which is the part that takes time.
A worked example
A self-employed electrician with turnover of £62,000 and a rental flat bringing in £9,000 a year had qualifying income of £71,000 on his 2024/25 return. He joined MTD for Income Tax on 6 April 2026. He now keeps both the trade and the property in cloud software with the bank feed connected, photographs receipts as they arrive, and sends two quarterly updates each quarter, one for each source, by 7 August, 7 November, 7 February and 7 May. The first update, for the quarter to 5 July 2026, was due by 7 August 2026 and showed cumulative income and expenses by category; the fourth, to 5 April 2027, is due by 7 May 2027. His final declaration for 2026/27 is due by 31 January 2028, when it will bring in his capital allowances on a new van, his pension contributions and the finance-cost credit on the flat's mortgage, and his tax is payable on the usual dates.
His wife, a part-time consultant with £24,000 of self-employment income and no property, is below every threshold announced so far and continues to file a Self Assessment return, though she expects to join in April 2029 if the £20,000 threshold is enacted and her income stays where it is.
What has not changed
The tax itself, the rates, the allowances, the payment dates, the expenses you can claim and the records you must keep by law are the same as before. MTD changes how and how often you report, not what you owe. Businesses that already kept monthly digital records have found the transition to be a matter of pressing a button four extra times a year; those that did not have had to change their habits, which is the part that takes time.