What is Making Tax Digital (MTD) for Income Tax?
Introduced for sole traders and landlords with qualifying income above £50,000, MTD for Income Tax requires:
- maintaining digital records using HMRC-recognised software,
- submitting quarterly updates on income & expenses,
- continuing to file a full Self Assessment tax return and pay tax due by 31 January following the tax year.(gov.uk)
First Quarterly Update Deadline: 7 August 2026
The deadline for reporting the first quarterly update—covering income & expenses from 6 April to 5 July 2026—is 7 August 2026 for those with qualifying income over £50,000.(gov.uk)
Penalties & Exemptions
- In this first year, no penalty points will be issued for late quarterly updates. However, penalties still apply for late Self Assessment returns and late payments.(gov.uk)
- Exemptions are available—e.g., for people who are digitally excluded. Check the official guidance if you believe an exemption applies.(gov.uk)
What You Need to Do Now
- If you’re a sole trader or landlord and earned over £50,000 in the 2024-25 year from self-employment and property income, ensure you have compatible software and are signed up and ready to send your update by early August.
- Review all your income sources and expenses from 6 April to 5 July—documents like bank statements, invoices, receipts—as required records via digital records will be needed.
- If acting through an agent (accountant/bookkeeper), delegate preparation now so nothing is missed.
Example Scenario
Maria is a UK landlord whose rental income and self-employment combined in 2024-25 exceeded £50,000. She has been preparing digital records and purchased compatible software. For the first three months of the 2026-27 year, her income and expenses totalled £8,000 income, £2,500 expenses. She inputs these into the software and submits by 7 August 2026. Because it’s the first year, no penalty if she’s a few days late—though she still wants to avoid interest or issues with her self-assessment submission.
Moving Forward: Phased Implementation
- From 6 April 2027, those with qualifying income over £30,000 must use MTD.
- From 6 April 2028, threshold drops to £20,000.
- The same rules apply to sole traders or landlords; partnerships & other types of income will be phased in later.(gov.uk)
Bottom Line: If you're already in scope, the first quarterly update is imminent. Use available time to set up, track records closely, and avoid falling into compliance traps.