Making Tax Digital for Income Tax is one of the biggest changes to how self-employed people and landlords report their income in decades. If you file a Self Assessment tax return, there’s a good chance it will affect you at some point over the next few years — if it hasn’t already. 

This guide explains what the rules are, who they apply to, what “qualifying income” actually means, and what you need to do to stay on the right side of HMRC. Everything here is based on current HMRC and GOV.UK guidance as of 2026.

What Is Making Tax Digital for Income Tax? 

Making Tax Digital (MTD) for Income Tax is an HMRC requirement for sole traders and landlords to keep digital records of their income and expenses and send quarterly updates to HMRC using compatible software, instead of relying only on a once-a-year Self Assessment return. It doesn’t change how much tax you pay — only how and when you report. 

The wider Making Tax Digital programme has been running for several years. It started with VAT, where keeping digital records and filing through software is already mandatory for VAT-registered businesses. Income Tax is the next major stage, and it’s where most sole traders and landlords come in. 

The key shift is from one annual return to ongoing digital reporting throughout the year. Rather than gathering a shoebox of receipts every January, you keep records as you go and submit short summaries every three months, with a final step at the end of the year that pulls everything together.

When Does Making Tax Digital for Income Tax Start? 

Making Tax Digital for Income Tax became mandatory on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. The threshold then lowers in stages: from 6 April 2027 it applies to those with qualifying income over £30,000, and from 6 April 2028 it extends to those over £20,000. 

It’s being introduced gradually rather than all at once, which is why so many people are unsure whether it applies to them yet. The date you’re brought into the system depends entirely on your income. 

MTD for Income Tax rollout timeline 

Partnerships are expected to be brought into MTD for Income Tax at a later date, but HMRC has not yet confirmed the timeline for them. Limited companies are not affected by MTD for Income Tax at all — they report through Corporation Tax, though they may already use Making Tax Digital for VAT if they’re VAT-registered. 

One exception worth flagging: individuals who complete the residence pages on their tax return are not required to join until April 2027, even if their income is above £50,000. This is a one-year deferral linked to changes in the rules for non-UK residents.

Who Needs to Use Making Tax Digital for Income Tax?

You need to use Making Tax Digital for Income Tax if you’re a sole trader or landlord and your qualifying income is above the threshold that applies for the relevant year. HMRC looks at your total income from self-employment and property, before expenses, based on the figures in your most recent Self Assessment return. 

So for the tax year starting 6 April 2026, HMRC uses the qualifying income reported on your 2024 to 2025 tax return (the one filed by 31 January 2026) to decide whether you’re in scope from day one. 

It’s important to understand that MTD applies per individual, not per business. If you have more than one sole trade, or you’re both self-employed and a landlord, your income from all of those sources is added together to test against the threshold. 

What Counts as Qualifying Income for MTD? 

Qualifying income is your total gross income from self-employment and property combined, before any expenses are deducted. In other words, it’s based on turnover, not profit. This is one of the most misunderstood parts of the whole system. 

Because the test uses gross income rather than profit, plenty of people who don’t think of themselves as “high earners” fall within scope. A landlord could be making very little actual profit after mortgage interest and costs, yet still be over the threshold on gross rent alone. 

What counts toward the threshold 

• Gross income from self-employment (your business turnover before expenses) 

• Gross income from property, including UK and overseas rental income (your share only, if the property is jointly owned) 

What does not count toward the threshold 

• Employment income taxed through PAYE 

• Income from a partnership (partnerships aren’t in MTD for Income Tax yet) 

• Dividends, savings interest and other investment income 

• Income that isn’t reported through self-employment or property pages 

Here’s how it works in practice. 

Illustrative example 1 — sole trader. A self-employed electrician turns over £62,000 before expenses in 2024 to 2025. Because gross self-employment income is above £50,000, they’re required to use MTD for Income Tax from 6 April 2026 — regardless of what their profit is after tools, van costs and materials. 

Illustrative example 2 — landlord. A landlord receives £41,000 in gross rent across their portfolio in 2024 to 2025. That’s below £50,000, so they aren’t in scope in April 2026. But it’s above £30,000, so they’ll be brought in from 6 April 2027 when the threshold drops. 

Illustrative example 3 — combined income. Someone earns £34,000 gross from freelance work and £22,000 gross from a rental property in the same year. Individually, each is under £50,000 — but MTD adds them together. Their qualifying income is £56,000, so they’re in scope from 6 April 2026. 

These examples are illustrative only and don’t account for individual circumstances.

Making Tax Digital for Sole Traders

If you’re a sole trader with qualifying income over the relevant threshold, you’ll need to keep digital records of your business income and expenses and submit a quarterly update for your self-employment to HMRC through compatible software. At the end of the year, you finalize everything with a final declaration. 

If you run more than one self-employed business, you keep separate digital records for each one and send a separate quarterly update for each. They then all feed into your single year-end submission. 

The practical upside is that good digital records, kept consistently, make the year-end far less painful than the traditional January scramble. The software holds your figures throughout the year, so there’s less to reconstruct from memory and paperwork. 

Making Tax Digital for Landlords

Landlords with qualifying income over the relevant threshold must keep digital records of their rental income and expenses and send quarterly updates for their property income, followed by a final declaration at the end of the year. This applies whether you let residential or commercial property. 

If a property is jointly owned, only your share of the rental income counts toward your qualifying income, and you report your share. 

If you have both a self-employed business and rental property, you keep the two sets of records separate and send separate quarterly updates for each — one for self-employment, one for property. Everything then pulls through into one year-end submission and one tax calculation. 

What Records Do You Need to Keep Digitally? 

Under MTD for Income Tax, you must keep digital records of your business and property income and expenses. Each transaction needs to be recorded digitally within compatible software, categorized so it can be totalized and reported. Paper records and mental arithmetic no longer meet the requirement on their own. 

In practice, your digital records should capture: 

• The amount of each item of income and expense 

• The date 

• The category it falls under (software handles the categories for you) 

You can still keep physical receipts and invoices — nothing stops you photographing or filing them — but the record that matters for MTD is the digital one inside your software. Many software packages include an app that lets you photograph a receipt and log it on the spot, which keeps things current. 

Keeping records up to date as you go, rather than in a rush before each deadline, is the single biggest practical habit that makes MTD manageable. This is where working with a bookkeeper or bookkeeping service can take the pressure off, especially if record-keeping isn’t something you enjoy. 

How Do MTD Quarterly Updates Work? 

Every three months, your software adds up your digital records into category totals and sends them to HMRC as a quarterly update. These updates are cumulative summaries of income and expenses — they are not tax returns and they don’t calculate your final bill. You send one update per income source each quarter. 

The standard quarterly deadlines are fixed: 

If it suits your record-keeping better, most software lets you elect for “calendar quarters” instead (periods ending 30 June, 30 September, 31 December and 31 March). The submission deadlines stay the same — 7 August, 7 November, 7 February and 7 May. 

Because updates are cumulative, an error early in the year carries through to later updates unless you correct it in your records, so it’s worth reconciling before each submission rather than rushing on the deadline. 

Do you pay tax quarterly under MTD? 

No. Quarterly updates do not mean you pay Income Tax four times a year. They’re information only — short summaries of income and expenses. Your tax payment deadlines don’t change: the usual Self Assessment dates still apply, including the 31 January balancing payment and payments on account where relevant. 

After each update, your software can show an estimate of your tax position for the year so far, which can actually make budgeting for your bill easier. But an estimate is not a demand, and no payment is triggered by an update.

What Happens at the End of the Year Under MTD?

At the end of the tax year, you complete a final declaration through your software. This replaces the traditional Self Assessment return for those in MTD. It brings together the figures from your quarterly updates, lets you make any accounting adjustments and claim reliefs and allowances, and confirms your final taxable income. 

The deadline for the final declaration is 31 January following the end of the tax year — the same date Self Assessment returns have always been due. Your tax payment deadline is unchanged too. 

So the year-end still exists; it just looks different. Instead of building a return from scratch, you’re confirming and adjusting figures your software already holds from the four quarterly updates. 

Traditional Self Assessment vs MTD for Income Tax 

How to Sign Up for Making Tax Digital for Income Tax

You are not automatically enrolled in MTD for Income Tax. Even though HMRC contacts many people it believes are in scope, you (or your accountant on your behalf) must actively sign up through HMRC’s online service using a Government Gateway account. 

The broad steps are: 

1. Check whether you’re in scope using your latest tax return figures and the relevant threshold. 
2. Choose compatible software from HMRC’s recognised list. 
3. Sign up through the GOV.UK “Sign up for Making Tax Digital for Income Tax” service, or have your agent do it for you. 
4. Keep digital records from the start of the tax year you’re mandated. 
5. Send quarterly updates by each deadline. 
6. Submit your final declaration by 31 January. 

If you use an accountant, they can register you and manage your quarterly updates and final declaration on your behalf, which is how many sole traders and landlords choose to handle it.

MTD Exemptions and Digital Exclusion

Some people can be exempt from MTD for Income Tax where it isn’t reasonable or practical for them to use digital tools — for example, due to age, disability, location (such as no reliable internet), or religious grounds. This is known as digital exclusion. Exemption isn’t automatic; it has to be applied for and agreed by HMRC. 

If you think you might qualify for an exemption, it’s worth looking into this well before your mandation date rather than assuming you’ll be excused. 

What Happens If You Don’t Comply With MTD?

MTD for Income Tax operates under HMRC’s points-based penalty system for late submissions, alongside penalties and interest for late payment. However, HMRC has confirmed a lighter touch during the first year: there are no late-submission penalty points for quarterly updates in the 2026 to 2027 tax year, to give people time to adjust. 

That grace period won’t last, so it’s sensible to build good habits from the start rather than treating the first year as optional. Keeping records current and submitting on time avoids the problem entirely.

MTD Myths vs Reality

Myth: “MTD means I’ll pay Income Tax four times a year.” Reality: Quarterly updates are information only. Your tax payment dates don’t change — the usual Self Assessment deadlines still apply. 

Myth: “The £50,000 threshold is based on my profit.” Reality: It’s based on gross income (turnover) before expenses, across your self-employment and property income combined. 

Myth: “If I’m already signed up for MTD for VAT, I’m covered.” Reality: MTD for VAT and MTD for Income Tax are separate. Being compliant with one doesn’t make you compliant with the other — you sign up for Income Tax separately. 

Myth: “HMRC will just enroll me automatically.” Reality: Registration is not automatic. You or your agent must sign up, even if HMRC has written to you. 

Myth: “I can keep using my spreadsheet exactly as before.” Reality: You can keep a spreadsheet, but it must be digitally linked to compatible bridging software to submit to HMRC. 

How to Prepare for Making Tax Digital 

The earlier you get set up, the smoother the transition. You don’t need to wait until your mandation date to start working digitally — many people volunteer early to iron out any issues. 

Practical MTD checklist 

•  Check your latest tax return to work out your qualifying income 

•  Confirm which threshold year applies to you (2026, 2027 or 2028) 

•  Choose MTD-compatible software from HMRC’s recognized list 

•  Set up a Government Gateway account if you don’t already have one 

•  Start keeping digital records of income and expenses 
•  Separate your self-employment and property records if you have both 

• Sign up through GOV.UK (or ask your accountant to) 

• Note the quarterly deadlines: 7 August, 7 November, 7 February, 7 May 

• Diarize your 31 January final declaration and payment date 

• Consider whether an accountant should manage the process for you 

For sole traders, the priority is usually getting business income and expenses into software cleanly and consistently. For landlords, it’s making sure rental income and allowable costs are captured for each property, and that jointly owned properties are split correctly. 

If you already file a Self Assessment tax return, a lot of the underlying information is the same — MTD mainly changes how and how often you report it.

Not Sure Whether Making Tax Digital Applies to You?

Working out your qualifying income, choosing the right software and keeping on top of quarterly deadlines can feel like a lot on top of running a business or managing property. It doesn’t have to be. 

Sahi Accountancy helps sole traders and landlords understand whether MTD for Income Tax applies to them, get set up with compatible software and digital records, and stay on top of their quarterly updates and year-end submission. Based in Birmingham and working with clients across the surrounding areas and in Edinburgh, we can take the admin off your hands so you can focus on what you actually do. 

If you’d like to know where you stand, book a free consultation and we’ll talk it through.

Frequently Asked Questions

What is MTD for Income Tax? Making Tax Digital for Income Tax is an HMRC requirement for sole traders and landlords to keep digital records and send quarterly updates to HMRC using compatible software, replacing the traditional once-a-year Self Assessment process for those in scope. 

When does Making Tax Digital start for sole traders and landlords? It started on 6 April 2026 for those with qualifying income over £50,000. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. 

Do landlords have to use Making Tax Digital? Yes, if your qualifying income from property (and any self-employment) is above the relevant threshold. Landlords in scope must keep digital records and send quarterly updates for their rental income. 

Do sole traders have to use Making Tax Digital? Yes, if your gross self-employment income (combined with any property income) is above the threshold for the relevant year. 

What is the MTD income threshold? £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028, based on qualifying income. 

Is the MTD threshold based on turnover or profit? Turnover. Qualifying income is your gross income from self-employment and property combined, before expenses — not your profit. 

What happens if I have both rental and self-employed income? The two are added together to test against the threshold. If you’re in scope, you keep separate records and send separate quarterly updates for each, which then combine into one year-end submission. 

Do I need MTD software? Yes. You must use HMRC-recognized compatible software to keep digital records and submit updates. Check HMRC’s official list before buying anything. 

Can I use Excel for Making Tax Digital? You can keep records in a spreadsheet, but it must be digitally linked to compatible bridging software to submit to HMRC. A spreadsheet on its own isn’t enough. 

Do I have to submit information every quarter? Yes. If you’re in scope, you send four quarterly updates a year, by 7 August, 7 November, 7 February and 7 May. 

Does MTD mean I pay tax quarterly? No. Quarterly updates are information only. Your tax payment deadlines don’t change — the usual Self Assessment dates still apply. 

Can my accountant submit MTD updates for me? Yes. An accountant can register you for MTD, keep your digital records, and submit your quarterly updates and final declaration on your behalf. 

What happens if I don’t comply with MTD? Late submissions fall under HMRC’s points-based penalty system, with penalties and interest for late payment. For the 2026 to 2027 tax year there are no late-submission penalty points for quarterly updates, but that grace period is temporary. 

This article is for general information only and reflects HMRC and GOV.UK guidance as of 2026. It isn’t personalized tax advice. MTD rules and thresholds can change, so check current GOV.UK guidance or speak to a qualified accountant about your own circumstances before making decisions. 

 Official Sources & Further Reading 

• GOV.UK — Find out if and when you need to use Making Tax Digital for Income Tax 

• GOV.UK — Sign up for Making Tax Digital for Income Tax 

• GOV.UK — Use Making Tax Digital for Income Tax: send quarterly updates 

• GOV.UK — Making Tax Digital for Income Tax campaign pages (dates and quarterly updates) 

• GOV.UK — “436,000 sole traders and landlords make their tax digital” (HMRC news release) 

• GOV.UK — Find software that’s compatible with Making Tax Digital for Income Tax