Making Tax Digital (MTD) for Income Tax means sole traders and landlords keep digital records and send HMRC a summary every quarter through compatible software, then file their tax return through that software by 31 January. It started on 6 April 2026 for people with qualifying income over £50,000. It extends to income over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028. Qualifying income is your gross self-employment and property income before expenses.
When MTD starts for you
| Your qualifying income | Measured in tax year | You must use MTD from |
|---|---|---|
| Over £50,000 | 2024 to 2025 | 6 April 2026 |
| Over £30,000 | 2025 to 2026 | 6 April 2027 |
| Over £20,000 | 2026 to 2027 | 6 April 2028 |
HMRC looks at your Self Assessment return each year and writes to you if your income is over the threshold. Not getting a letter does not take away your responsibility to check. You must still file a Self Assessment return for the tax year before you start. Partnerships will join MTD later; HMRC has not set a date.
What counts as qualifying income
Qualifying income is your total income from self-employment and property, before expenses. It is your turnover, not your profit. HMRC works it out from the tax return you filed for the test year.
Counts:
- Self-employment income (sole trader turnover)
- Property income (rents from UK property, and foreign property if you are UK tax resident)
- Your share of jointly owned property income
Does not count:
- Employment income taxed through PAYE
- Your share of partnership profit as an individual partner
- Dividends, including from your own company
- State and private pensions
Worked example: you earn £27,000 from self-employment and £25,000 in rent. Your qualifying income is £52,000, so you are in from April 2026, even though your profit is far lower.
Jointly owned property: only your share counts. If you and a sibling own a property equally and it brings in £50,000 a year, your qualifying income from it is £25,000.
What changes day to day
- Keep digital records. Each income and expense needs its amount, date and a category. If your turnover is below the VAT registration threshold, you only need to mark each item as income or expense.
- Use compatible software. Either accounting software on HMRC's list, or spreadsheets linked to bridging software. Records must move between programs by digital link, such as an import, an export or linked cells, not by retyping or copy and paste.
- Send quarterly updates. Each update is a summary of income and expense totals for the tax year so far. It is not a tax return, and HMRC does not see your receipts.
- File your tax return through the software by 31 January after the tax year, after making your year-end adjustments.
Quarterly update deadlines
| Period (standard, from 6 April) | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May |
You can choose calendar quarters instead (ending 30 June, 30 September, 31 December and 31 March); the deadlines stay the same. Each update covers the year to date, so you can fix earlier errors in the next one rather than resending.
Penalties
For the 2026 to 2027 tax year, late quarterly updates do not earn penalty points. From 2027 to 2028 onwards, each late update earns a point, and reaching 4 points triggers a £200 penalty. Late tax returns earn points as before. You must send an update even for a quarter with no income or expenses.
What to do now
- Check your qualifying income for the test year that applies to you, using your gross figures.
- Choose software that is on HMRC's list and suits how you work. Our bookkeeping software comparison covers Xero, QuickBooks, FreeAgent and Sage.
- Move your record-keeping to a monthly routine so each quarter is a summary, not a scramble.
- If you are a landlord, read our MTD guidance for landlords.
- Before your first deadline, work through the first quarterly update checklist.
Some people are exempt, for example if they are digitally excluded. Exempt people still file a Self Assessment return. Check HMRC's exemptions guidance if this might apply to you.
Frequently asked questions
Is the MTD threshold based on profit or turnover?
Turnover. Qualifying income is your gross self-employment and property income before expenses, so a sole trader with £60,000 of sales and £40,000 of costs is over the £50,000 threshold.
I'm employed and have a small rental property. Does my salary count?
No. PAYE employment income is excluded. Only your self-employment and property income count towards the threshold.
Do I still need to file a Self Assessment tax return?
Yes. Under MTD you file your tax return through compatible software by 31 January after the tax year. The quarterly updates do not replace it.
Can I keep using spreadsheets?
Yes, if you link them to bridging software and the records move digitally. You cannot retype or copy and paste figures between programs once they are in your records.
What happens if I miss a quarterly update in the first year?
For the 2026 to 2027 tax year, late quarterly updates do not earn penalty points. From the following year each late update earns a point, and 4 points means a £200 penalty.
Sources (reviewed 15 October 2026)
Not sure when MTD starts for you, or whether your records are ready? Book a free 30-minute call with Larissa and she'll check your position.
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