What is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) for Income Tax is HMRC's replacement for the annual Self Assessment tax return. Instead of one return a year, you keep digital records and send HMRC a cumulative quarterly update through approved software, plus a final declaration. It became mandatory on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, dropping to over £30,000 from April 2027 and over £20,000 from April 2028 (GOV.UK).
At a glance — the three phases
| Phase starts | Mandatory if gross income over | Based on this return | First quarterly update by |
|---|---|---|---|
| 6 April 2026 | £50,000 | 2024/25 | 7 August 2026 |
| 6 April 2027 | £30,000 | 2025/26 | 7 August 2027 |
| 6 April 2028 | £20,000 | 2026/27 | 7 August 2028 |
Source: GOV.UK — Check if you need to use Making Tax Digital for Income Tax.
What “qualifying income” actually means
Two things people get wrong immediately — and both put real people unexpectedly in scope.
- Qualifying income is gross, and it is combined. It is your total gross income from self-employment and property before any expenses — not profit. A landlord with £30,000 of rent and £29,000 of self-employed turnover is over the £50,000 line and in scope from April 2026, even though neither source alone would put them there (GOV.UK guidance). This catches people with multiple small income streams who never thought of themselves as “high earners.”
- The test is based on a past return. If your 2024/25 gross income was over £50,000, you are in MTD from April 2026 — even if your income has since dropped. The phase-in date is locked to the figure on the relevant earlier Self Assessment return (GOV.UK).
Read the full who-is-in-scope guide →
What changes in practice — the new quarterly cycle
The annual Self Assessment return is replaced by three obligations:
- Digital record-keeping.Income and expenses recorded digitally in compatible software — not paper, not standalone spreadsheets unless they are bridged to compatible software. Records kept as you go, not assembled in January.
- Quarterly updates. A summary of income and expenses submitted each quarter. Following Autumn Budget 2025 simplification, each update reports cumulative year-to-date figures rather than standalone quarters — which means correcting an earlier error is a matter of re-stating the cumulative position, not amending a prior submission (ICAEW).
- Final declaration. After year-end, you confirm the figures, add any other income (employment, savings, dividends), and finalise your tax — replacing the annual Self Assessment return. The separate End-of-Period Statement requirement has been removed (Deloitte Taxscape summary).
Two practical points often missed: a person with both a sole trade andproperty gets two sets of quarterly updates; and the payment dates for your tax bill do not change — only the reporting cadence does. The cultural shift is real, though: bookkeeping becomes a quarterly discipline, not an annual scramble.
Read the full quarterly-cycle breakdown →
What the penalty regime looks like — and what the soft landing does not cover
MTD uses a points-based late-submission system: one penalty point per missed deadline. At four points (for mandated taxpayers) HMRC charges £200, with a further £200 for each later miss. Points reset after a 12-month compliance period with all submissions up to date (ICAEW).
There is a soft landing for the first year: April 2026 joiners receive no penalty points for late quarterly updates during 2026/27. The grace period is real but narrow:
What the 2026/27 soft landing does NOT cover
- The final declaration deadline (due 31 January 2028 for 2026/27).
- Late-payment penalties (2% of unpaid tax after 15 days, 4% after 30 days).
- You still must submit every quarterly update before you can file the final declaration.
Read the full penalty + soft-landing guide →
MTD for landlords specifically
Landlords are squarely in scope. The points landlords most often get wrong:
- It is gross rent, not profit. A mortgaged landlord with thin margins can still be well above the threshold on gross rents alone.
- Combined with other income. Rent plus any self-employment is added together against one threshold (LITRG).
- Your share counts. For jointly owned property, it is your share of the income that goes toward your figure.
- Quarterly cadence. Rental income and allowable expenses recorded digitally and reported every quarter — a real change for landlords used to handing a shoebox of figures to an accountant once a year.
Read the landlord-specific guide →
MTD for sole traders
For sole traders, the rules are the same shape as for landlords, but two situations catch people out: combined-income totals (a sole trade plus side-let property), and the partnership exemption (general partnerships are not yet mandated) (GOV.UK).
Choosing MTD-compatible software
To comply, you must use HMRC-recognised compatible software to keep digital records and submit quarterly updates. Compatible software must connect directly to HMRC, support cumulative quarterly updates and the final declaration, and handle all your income streams. You can use one all-in-one product, or bridging software that links to digital records held elsewhere (GOV.UK).
Compare your software options →
How to prepare before your start date
A practical, do-it-now sequence — useful whether your start date is April 2026, April 2027, or April 2028:
- Confirm your phase. Check your qualifying income on the relevant past return against the thresholds (£50k → 2026, £30k → 2027, £20k → 2028) using the GOV.UK eligibility tool.
- Decide your approach. All-in-one software, bridging software, or hand it to an accountant. Decide who is doing what before you sign up.
- Go digital early. Start recording income and expenses digitally now — don't wait for the start date. The habit is the hard part, not the tech.
- Sign up and authorise. Register for the service and authorise your software or agent before your first quarterly update is due.
- Do a dry run. Simulate a quarterly update before it counts, so the first real one is not a panic.
Read the full preparation checklist →
Useful free tools while you're here
Three calculators in the RR free-tools suite that pair naturally with MTD planning:
- Self Assessment tax calculator — model your 2026/27 bill before the year ends.
- Salary vs dividend optimiser — if you are also a limited-company director, this maps the trade-offs MTD doesn't cover.
- Take-home pay calculator — for the employment side, if you have a mixed income mix.
Frequently asked questions
What is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) for Income Tax is HMRC's replacement for the annual Self Assessment tax return. Instead of one return a year, you keep digital records and send HMRC a cumulative quarterly update through approved software, plus a final declaration after the tax year. It became mandatory on 6 April 2026 for sole traders and landlords with qualifying income over £50,000.
Who has to use MTD for Income Tax?
From 6 April 2026: anyone with qualifying income over £50,000 on their 2024/25 Self Assessment return. From 6 April 2027: the threshold drops to over £30,000 (based on the 2025/26 return). From 6 April 2028: over £20,000 (based on the 2026/27 return). Qualifying income is total gross income from self-employment and property combined, before any expenses.
Is the MTD threshold based on profit or gross income?
Gross income. It is total turnover from self-employment plus total gross rental receipts, before any expenses are deducted. A mortgaged landlord with £60,000 of gross rent but only £8,000 of net profit is still over the £50,000 threshold and in scope.
Do self-employment and property income combine for the MTD threshold?
Yes. They are added together against one threshold. A self-employed person with £25,000 turnover plus £30,000 gross rental income has £55,000 of qualifying income and is in scope from April 2026.
What do I actually have to do under MTD for Income Tax?
Three obligations replace the annual return: (1) keep digital records of income and expenses in compatible software throughout the year; (2) send HMRC a cumulative quarterly update each quarter; (3) submit a final declaration after the tax year to confirm figures and finalise your tax. The payment dates for your tax bill do not change — only the reporting cadence.
What happens if I miss an MTD quarterly deadline?
MTD uses a points-based late-submission system: one penalty point per missed deadline. At four points (for mandated taxpayers) HMRC charges £200, with a further £200 for each later miss. There is a soft landing for 2026/27 — no penalty points for late quarterly updates in the first year for April 2026 joiners. Late-payment penalties and the final declaration deadline are not covered by the soft landing.
Do I have to use specific software for MTD?
You must use HMRC-recognised compatible software to keep digital records and submit quarterly updates. The software must connect directly to HMRC, support cumulative quarterly updates and the final declaration, and handle all your income streams. You can use one all-in-one product or bridging software that links to digital records.
Can I opt out of MTD if my income drops below the threshold?
If a past return put you in scope, you are in MTD by default. You may be able to opt out if your income stays below the threshold in later years, but this is not automatic — you need to apply. Exemptions also exist for the digitally excluded and those unable to obtain a National Insurance number.
When does MTD for Income Tax apply to partnerships?
Partnerships are not yet mandated for MTD for Income Tax. HMRC has indicated mandation will be confirmed at a later date. Until then, partnerships continue with Self Assessment partnership returns.
How does MTD affect the final tax bill date?
It does not. The reporting cadence becomes quarterly, but income tax payment dates remain unchanged: 31 January (balancing payment plus first payment on account) and 31 July (second payment on account). The first MTD final declaration for the 2026/27 tax year is due by 31 January 2028.
The full MTD-IT series
Seven companion guides that go deeper than the pillar.
Who is in scope
The threshold rules, gross-income test, base-year examples.
What you do each quarter
The new cumulative-update cycle, deadlines, dry runs.
Penalties and the 2026/27 soft landing
Point system, the £200 threshold, what the grace period does and does not cover.
MTD for landlords
Gross rent, joint ownership, what counts as your share.
MTD for sole traders
Self-employment rules, side-income combinations, partnership status.
Choosing MTD-compatible software
What HMRC requires, bridging vs all-in-one, what to weigh.
How to prepare before your start date
A practical do-it-now checklist.
MTD for Income Tax doesn't have to land on you alone.
Three ways into compliance — pick the one that fits how you work.
RR
Done-for-you MTD by a chartered practice
We run the quarterly cycle for you — digital records, MTD submissions, the final declaration, deadline tracking. No software learning curve.
Talk to RRSmartBooks
MTD-ready bookkeeping for sole traders
UK-built bookkeeping software designed for MTD from day one. Quarterly updates, cumulative submissions, and the final declaration — handled.
See SmartBooksLandlordFlow
MTD for landlords, property-by-property
Built for landlords: rent ledgers, allowable-expense tracking, SPV-aware reporting, and MTD-compliant quarterly submissions.
See LandlordFlow
About the author
Mehmood Rajoka, Managing Partner, RR Accountants
Managing Partner at RR Accountants — a UK practice supervised by the Institute of Financial Accountants. Specialist focus on UK landlord and property tax, MTD for Income Tax, and limited-company advisory. RR Accountants serves clients across four UK offices.
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This guide is general information about UK tax rules. It is not personal tax advice. For advice tailored to your situation, speak to a regulated UK accountant. All figures verified against gov.uk and ICAEW as of . MTD rules continue to evolve — re-check primary sources before acting.