Making Tax Digital for Income Tax is the biggest change to Self Assessment in a generation. From April 2026, many sole traders and landlords will need to keep digital records and send updates to HMRC during the tax year, rather than filing a single tax return once a year.
If your qualifying income is over £50,000, you will be in the first wave. If it is over £30,000, you will follow a year later. This guide explains who must join, what you will need to do, and the five steps you can take now to get ready.
What Is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) is HMRC’s programme to modernise the UK tax system. Instead of a paper-based or once-a-year process, businesses keep digital records and send information to HMRC using compatible software. MTD for VAT has been in place for several years, and MTD for Income Tax now extends the same approach to Self Assessment.
Under MTD for Income Tax, you will still pay tax on your profits, but the way you report them changes. You will send HMRC a summary of your income and expenses every quarter, plus a final declaration at the end of the year. The aim is to reduce errors, cut down on paperwork and give you a clearer picture of your tax position throughout the year.
Who Must Join, and When?
Whether you must join Making Tax Digital for Income Tax depends on your qualifying income — your total gross income from self-employment and property, before expenses are taken off.
From April 2026: Qualifying Income Over £50,000
If your qualifying income is over £50,000, you must join MTD for Income Tax from 6 April 2026. This covers many sole traders and landlords with larger incomes, and includes those whose income comes from a mix of self-employment and property.
From April 2027: Qualifying Income Over £30,000
If your qualifying income is over £30,000, you must join Making Tax Digital for Income Tax from 6 April 2027. This brings a much larger group of sole traders and landlords into the system.
Your qualifying income is based on the tax year before you join. For example, HMRC will look at your 2024–25 tax return to decide whether you must join in April 2026, and at your 2025–26 return for April 2027.
Those with qualifying income below £30,000 are not required to join Making Tax Digital for Income Tax yet. Partnerships are also outside the first two waves, and HMRC has said it will announce their joining date later. If you are digitally excluded — for example, because of disability, age or where you live — you can apply for an exemption.
What You Will Need to Do Each Year
Once you are in MTD for Income Tax, the annual cycle looks like this:
- Keep digital records. Record your income and expenses in MTD-compatible software as they happen, rather than keeping paper records or a manual spreadsheet on its own.
- Send quarterly updates. Every three months you send HMRC a summary of your income and expenses for that quarter. The quarterly periods run 6 April to 5 July, 6 July to 5 October, 6 October to 5 January and 6 January to 5 April, and each update is due one month after the quarter ends.
- Complete an End of Period Statement. After the tax year ends, you finalise the figures for each of your businesses and properties, claiming any accounting or tax adjustments.
- Make a final declaration. Finally, you confirm that everything is complete and correct. This replaces the Self Assessment tax return for your self-employment and property income.
Your quarterly updates give you an estimate of the tax you owe, so there should be fewer surprises at the year end — but the estimate is only as good as the records behind it.
Penalties for Late or Missing Updates
HMRC will use a points-based penalty system for MTD for Income Tax, similar to the one already used for VAT. You collect penalty points for late quarterly updates and late submissions, and if you reach the points threshold you will receive a £200 financial penalty.
Points expire over time, and HMRC says the system is designed to be fair to the occasional mistake. Even so, it is far better to build a routine that gets updates sent on time — the points system rewards consistent filing, not last-minute catch-ups.
Five Steps to Prepare Now
Getting ready early for Making Tax Digital for Income Tax will make the switch far easier. Here are five practical steps:
- Work out your qualifying income. Add up your gross self-employment and property income from your most recent tax return, before expenses. This tells you whether you join in 2026, 2027 or not yet.
- Review your record keeping. If you still keep paper records or a spreadsheet, start recording income and expenses digitally now. The earlier you move, the less you will have to change at the deadline.
- Choose MTD-compatible software. You will need software that can keep digital records and send updates to HMRC. Check HMRC’s list of compatible products, and choose one that fits how you work — some are free or low cost for simple businesses.
- Try a quarterly routine. Start preparing a quarterly summary now: your income and expenses for each three-month block. This will show you where your records are thin and what needs tightening up.
- Plan your calendar. Note the four quarterly deadlines and the final declaration deadline, and set reminders. If you use an accountant, talk to them about who will handle each part of the process.
Related reading: Filing a return? Read our guide to Self Assessment tax return deadlines in the UK, with the key dates, penalties and how to file.
Frequently Asked Questions
Does Making Tax Digital apply if my income is under £30,000?
No. If your qualifying income is £30,000 or less, you do not currently have to join MTD for Income Tax. You can still join voluntarily if you would like the benefits of digital record keeping.
Do I still have to file a Self Assessment tax return?
Once you are in MTD for Income Tax, the final declaration replaces the Self Assessment tax return for your self-employment and property income. Other income, such as employment income or savings, will still be reported through your tax account as it is now.
Can I use a spreadsheet instead of software?
You can keep your records in a spreadsheet, but the spreadsheet must connect to HMRC using bridging software that can send your updates. A spreadsheet on its own is not MTD-compatible.
What happens if I miss a quarterly deadline?
You will receive a penalty point for the late update. Points build up over time, and reaching the threshold leads to a £200 penalty. If you miss a deadline, submit the update as soon as you can.
How We Can Help
Preparing for Making Tax Digital for Income Tax is much easier with a clear plan and records that are already in good shape. Financial Accounting Firm helps sole traders and landlords get ready for MTD for Income Tax, from choosing software to keeping quarterly updates on track. Contact us to discuss how we can help you prepare.
This article is general information only and should not be taken as personal tax or financial advice. Tax rules can change, and your position will depend on your own circumstances.
