Making Tax Digital for Income Tax: Who, When and How

What Making Tax Digital for Income Tax is

Making Tax Digital (MTD) for Income Tax changes how sole traders and landlords report their income to HMRC. Instead of one annual return built from a year of paperwork, you:

• keep digital records of your self-employment and property income and expenses
• send a summary to HMRC every quarter from compatible software
• submit your tax return from the same software by 31 January after the tax year

HMRC's guidance says MTD "will not change the way you pay tax or the dates that payments are due". The first quarterly deadline was 7 August 2026, and HMRC said more than 864,000 sole traders and landlords were in scope for it.

Who must use it, and from when

You must use MTD for Income Tax if you are a sole trader or landlord registered for Self Assessment and your qualifying income is over the threshold. HMRC looks at the return for an earlier tax year to decide, as its eligibility guidance sets out:

After it reviews your Self Assessment return, HMRC writes to confirm that you need to start using MTD for Income Tax from the start of the following tax year. So a sole trader whose 2025/26 return shows £35,000 of gross income should expect a letter and must start on 6 April 2027. Keep an eye on your own figures so the letter is not a surprise.

What counts as qualifying income

Qualifying income is your gross income from self-employment and property, before any expenses are taken off. HMRC's guidance on how to work out your qualifying income says it includes:

• turnover from UK self-employment (all your sole trader businesses added together)
• UK property rental income
• foreign property income, if you are UK tax resident
• your share of income from a property you own jointly

It does not include employment income taxed through PAYE, your share of profit from a partnership, dividends, the State Pension or private pensions. HMRC's own example: £25,000 of rental income plus £27,000 of self-employment income is £52,000 of qualifying income, which is over the £50,000 threshold, even though neither source alone is.

Quarterly update deadlines

You send a quarterly update for each self-employment and property business you have. Each update is a running total for the tax year to date, by income and expense category, not a list of individual receipts. HMRC's guidance on sending quarterly updates gives these deadlines:

If you spot a mistake or forgot an expense, you can correct it in a later update, or resend the fourth update before you submit your tax return. HMRC says an update takes minutes in compatible software once your records are up to date. Our compliance deadline calendar can remind you of each date.

The tax return at the end of the year

After the fourth update, you make any year-end adjustments and then submit your tax return from your software. This step is often called the final declaration. HMRC says you must submit your tax return by 31 January following the end of the tax year, and you can submit it earlier.

The return covers all your income, not only the MTD businesses. HMRC adds employment income, pensions and certain benefits for you, but you must include savings interest, dividends, partnership profits and any other income yourself. You then pay by the usual Self Assessment dates. Our Self Assessment deadlines guide lists them.

Software and digital records

You need software that HMRC recognizes for MTD for Income Tax. HMRC's software finder lists two main types:

• Record-keeping software, which creates your records by linking to your business bank account, scanning receipts and invoices, or manual entry.
• Bridging software, which connects to records you already keep in spreadsheets or other tools and sends the updates.

HMRC says free products are available for people with simple tax affairs, with limits such as a cap on transactions, and that it does not recommend any product.

Your digital records must show the amount, the date and the category of each income or expense item. Create them as close to the transaction date as you can, and no later than the quarterly deadline. If you use spreadsheets, they must be digitally linked to your bridging software (for example by linked cells, file import or an API), not retyped. Landlords who let property jointly can keep less detailed records.

Exemptions, deferrals and digital exclusion

Some people are exempt automatically, some are deferred, and some can apply for an exemption. HMRC's exemption guidance lists them.

Automatic exemptions

• qualifying income of £20,000 or less
• no National Insurance number before the tax year starts
• trustees, personal representatives of someone who has died, and non-resident companies
• Lloyd's members who use the SA103L page
• people who cannot give the information because of physical or mental incapacity, where a power of attorney or legal guardian is in place

Partnerships are not in MTD for Income Tax yet.

Deferred until at least April 2027

If your 2024/25 return included any of these, you do not need to join yet: averaging relief (farmers and creators), qualifying care relief (foster and kinship carers), the SA107 trusts page, or the SA109 residence and remittance page. The SA109 group includes people who are not UK resident. Ministers of religion (SA102M) and people claiming Married Couple's Allowance or Blind Person's Allowance are deferred beyond April 2027.

Digitally excluded

You can apply for an exemption if it is not reasonable for you to go digital: for example your age, a health condition or a disability stops you using a computer, your religious beliefs are incompatible with electronic communications, or you cannot get internet access at home or work because of your location. HMRC says preferring paper, not knowing the software, having few records, or the cost and time of software are not reasons for an exemption.

Penalties in 2026/27

MTD for Income Tax uses a points-based system for late submissions. HMRC's MTD penalties guidance says:

• No penalties for late quarterly updates in 2026/27. HMRC says "there are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year". You still have to send all four updates before you can submit your tax return.
• Late tax returns earn points. Each missed tax return deadline adds 1 point, and from 2027/28 so does each missed quarterly update. At 4 points you get a £200 penalty, and another £200 for each further missed deadline. Points below the threshold expire after 24 months.
• Late payment penalties follow a separate schedule, shown below.

In your first year under the new penalties, HMRC gives you 30 days from the due date to pay in full or set up a payment plan before a penalty applies. Interest is charged on late tax as well.

Sole traders, landlords and company directors compared

MTD for Income Tax is about the tax year you report on your personal return, so who is affected depends on the type of income, not your job title.

• Sole traders: in scope once total self-employment turnover (plus any property income) passes the threshold. New sole traders should read our guide on how to register as a sole trader first.
• Landlords: gross rents count, including your share of a jointly owned property and foreign rents if you are UK resident. A landlord with £32,000 of rent and no other qualifying income joins from 6 April 2027, based on the 2025/26 return.
• Company directors: salary and dividends from your own limited company do not count, so a director whose only income is from the company is not in MTD for Income Tax. The company itself pays Corporation Tax and files a CT600, which is outside MTD for Income Tax. A director with a side business as a sole trader, or rental property, counts that income toward the threshold.

For people choosing between being a sole trader and running a company, MTD is one factor among many. Our comparison of sole trader vs limited company covers the wider picture.

What to do now

1. Work out your qualifying income for 2024/25 and 2025/26 from your returns: gross self-employment turnover plus gross property income.
2. Check the exemptions and deferrals, especially if you are not UK resident or file the SA109 page.
3. Choose compatible software from HMRC's list, or bridging software if you want to keep your spreadsheets.
4. Move your records into digital form from the start of the tax year you join, with date, amount and category for each item.
5. Send each quarterly update by the 7th of the month after the quarter ends.
6. Submit your tax return from the software by 31 January and pay on the usual dates.

How Borderless Filings can help

You can do all of this yourself with free or paid software, and many sole traders with simple records will. Our Self Assessment service covers Self Assessment registration and the annual tax return: our filing partner prepares the return from the records you upload to our secure portal, checks it with you, submits it, and sends reminders before each deadline. If you are in MTD for Income Tax, tell us at intake. Quarterly updates depend on your records and software, so we confirm what we can cover for your case, and the price, before you pay. If your situation needs tax advice, for example on residence or on whether an exemption applies, we will say so and suggest a qualified adviser.

Sources

• HMRC: Find out if and when you need to use Making Tax Digital for Income Tax
• HMRC: Work out your qualifying income for Making Tax Digital for Income Tax
• HMRC: Use Making Tax Digital for Income Tax: send quarterly updates
• HMRC: Use Making Tax Digital for Income Tax: submit your tax return
• HMRC: Use Making Tax Digital for Income Tax: create digital records
• HMRC: Find software that's compatible with Making Tax Digital for Income Tax
• HMRC: Find out if you can get an exemption from Making Tax Digital for Income Tax
• HMRC: Penalties for Making Tax Digital for Income Tax
• HMRC: Deadline approaches for first Making Tax Digital quarterly update

Fees, deadlines and rules on this page were last checked on 27 September 2026.