What is Making Tax Digital for Income Tax (MTD-IT)?
Making Tax Digital for Income Tax (MTD-IT) is a phased UK requirement for sole traders and landlords to use digital records and quarterly updates sooner. If your annual income from self-employment and property (before expenses) exceeds certain thresholds, you’ll need to comply. (gov.uk)
| Tax year | Qualifying income threshold |
|---|---|
| From 6 April 2026 | Over £50,000 |
| From 6 April 2027 | Over £30,000 |
| From 6 April 2028 | Over £20,000 |
Key Compliance Changes from April 2026
Digital record-keeping
You’ll need software compatible with HMRC’s requirements to keep income & expense records in a digital format. This includes business & property income, supporting documents, and regular corrections to records if you spot errors. (gov.uk)
Quarterly updates
Each tax year is split into quarterly reporting periods. For example, from 6 April 2026, those over the threshold will send the first update (covering 6 April–5 July) by 7 August 2026. This is in addition to the annual tax return by 31 January following the tax year. (gov.uk)
Penalty structure
The penalty system is changing for those joining MTD-IT. For the first year (2026–27), HMRC will not issue penalty points for missed quarterly updates, though late Self Assessment returns and payments are still penalised. From subsequent years, points per missed quarter, thresholds, and fixed penalties will matter. (gov.uk)
Real-world Example
Jane is a sole trader renting out a property with qualifying income of £60,000 (self-employment + property turnover before expenses). From 6 April 2026, she must:
- Set up digital accounting software to maintain records.
- Make quarterly updates: 6 April–5 July (by 7 August), 6 July–5 October (by 7 November), etc.
- Still file an annual return by 31 January 2027 for the 2025–26 tax year.
- Expect penalties if she misses the deadlines after the first year; no penalty points in 2026–27 for missed quarterly updates.
Actionable Advice to Get Ready
- Check your qualifying income based on your most recent tax-return turnover. If close to thresholds, plan ahead.
- Choose compatible software early. Look for features that allow quarterly updates, corrections to records, and integration with HMRC.
- Sign up in advance: if required from 6 April 2026, you can volunteer now; agents can also sign up clients.
- Plan cash flow & time: with quarterly updates, you’ll need to monitor income & expenses regularly rather than just at year-end.
- Consider exemptions: if you’re digitally excluded or meet another exemption criteria, apply and maintain current filing until exemption ends. (gov.uk)
Why It Matters
MTD-IT aims to improve accuracy, reduce late submissions, modernise tax administration, and reduce burdens over time. For many, the upfront effort and costs (software, time) will be offset by fewer errors, better forecasting, and less risk of penalties.