What is MTD for Income Tax?
Making Tax Digital for Income Tax is HMRC’s initiative to modernise how sole traders and landlords report their Income Tax and property income. Starting 6 April 2026, those with gross self-employment or property income exceeding £50,000 will move from annual returns to digital record-keeping and quarterly updates. (gov.uk)
Who Is In Scope
- Individuals registered for Self Assessment. (gov.uk)
- Must have qualifying income (gross income from self-employment and/or property) over £50,000. (gov.uk)
- Landlords or sole traders under that threshold are exempt for now. Over time thresholds may lower in later years. (gov.uk)
What You Need To Do to Comply
- Keep digital records using compatible software—not simple spreadsheets. (gov.uk)
- Send quarterly updates of income and expenses. (gov.uk)
- Submit full tax return and pay tax as usual by 31 January following the end of the tax year. (gov.uk)
Examples of Compliance Requirements
| Scenario | What’s Required |
|---|---|
| Sole trader running a small shop with £60,000 in self-employed income | Must keep digital records, make quarterly submissions for 2026/27. |
| Landlord renting out one property but rents + other income total under £50,000 | Not required under MTD until threshold changes in future years. |
| Mixed income (self-employment + property) over £50,000 | Combined income counts toward threshold. Must comply. |
Why This Matters
- Penalties can apply for missed quarterly updates. Although stepped or test-phase leniency may apply, compliance is expected. (gov.uk)
- Encourages regular awareness of tax liabilities; fewer surprises at the year-end.
- Easier filing with digital records all year round.
Action Steps for Affected Taxpayers
- Check your income: Estimate combined self-employed + property gross income. Are you over £50,000?
- Choose suitable software: Only certain platforms are fully compatible with HMRC’s MTD system.
- Set up regular bookkeeping: Monthly or quarterly updates to avoid backlog.
- Budget cash flow for tax payments: Quarterly reporting doesn't change deadlines for paying tax but highlights what’s due sooner.
- Seek guidance: HMRC and professional advisors are releasing step-by-step directions—stay informed.
Complying from the start reduces risk—and with many overlapping changes in 2026/27, staying ahead with accounting and tax changes pays off.