What is MTD for Income Tax and who it affects
From 6 April 2026, if you’re a sole trader or landlord and your qualifying income from self-employment and UK property (before expenses) exceeded £50,000 in the 2024-25 tax year, you must use Making Tax Digital (MTD) for Income Tax. (gov.uk) If your income is over £30,000 in 2025-26, or over £20,000 in 2026-27, those thresholds will require MTD from 6 April 2027 and 6 April 2028, respectively. (gov.uk)
Key requirements under MTD for Income Tax
You’ll need to:
- keep digital records of your self-employment and property income and expenses using software compatible with HMRC’s MTD requirements. (gov.uk)
- send quarterly updates summarising those records (not full tax returns). Deadlines are typically every 3 months (for example, for tax year 2026-27 the first deadline was 7 August 2026). (gov.uk)
- submit your annual Self Assessment tax return using MTD-compatible software by 31 January following the end of the tax year. For tax year 2025-26, that deadline is 31 January 2027. (gov.uk)
Penalties and transitional relief
For the 2026-27 tax year, HMRC will not issue penalty points for late quarterly updates, but points will apply for late annual returns. (gov.uk) From 2027-28 onward, penalties will apply for missing either quarterly deadlines or the return deadline. (gov.uk)
Practical examples & what you should do now
| Scenario | Action required now |
|---|---|
| Sole trader, gross income £60,000 in 2024-25 | Already required to use MTD from April 2026. Ensure software in place and quarterly record-keeping starts. |
| Landlord whose gross rent from property was £40,000 in 2024-25 | Also required from April 2026. Register, get software and start updates. |
| Income drops below threshold in future years | If income in the previous tax year falls below threshold, you may evade mandation—but still must keep records until notified. |
Agent & compliance tips
- Agents should check which clients are required to use MTD and help them sign up well before deadlines. (gov.uk)
- Choose software that handles digital records, quarterly updates and annual returns—and supports integrating other income sources (dividends, pensions, etc.) since all income must go into annual return. (gov.uk)
- Be alert to transitional changes—guidance was updated in July-August 2026 regarding record-keeping start dates, income source additions/cessations, penalty points, etc. (gov.uk)
- Check whether you are exempt (e.g. due to digital exclusion) via GOV.UK and keep supporting evidence. (gov.uk)
Why this matters
MTD for Income Tax is the biggest change in Self Assessment since its inception. It is intended to:
- reduce errors and unexpected tax bills by enabling real-time visibility of income and expenses,
- spread the compliance burden over the year, rather than leaving everything to January,
- encourage better digital adoption for tax advisers, software providers and taxpayers. (gov.uk)
Actionable steps you should take:
- determine your qualifying income for the last tax year to see if you're in scope;
- get or verify software that is MTD-compatible (look at HMRC’s approved list);
- familiarise yourself with quarterly update deadlines and plan cash flow accordingly;
- consult a tax adviser if your income, business structure or property holdings are complex.