Making Tax Digital for Income Tax: dates, thresholds and what to do

The short answer

Making Tax Digital (MTD) for Income Tax changes how sole traders and landlords report to HMRC. Instead of one Self Assessment return a year, you keep digital records of your business and property income and expenses, send HMRC a summary every three months from compatible software, then submit your tax return from the same software by 31 January after the tax year.

It is already live. If your qualifying income was over £50,000 in the 2024 to 2025 tax year, GOV.UK says you should have started on 6 April 2026. The next waves are £30,000 from April 2027 and £20,000 from April 2028. As of 9 October 2026, the next quarterly deadline for people already in is 7 November 2026.

If you run a limited company and your only income is salary and dividends from it, MTD for Income Tax does not apply to you.

Who has to use it, and when

GOV.UK says you need to use MTD for Income Tax if all of these apply: you are a sole trader or landlord registered for Self Assessment, you get income from self-employment, property or both, and your qualifying income is over the threshold for the relevant tax year.

Notice the lag. HMRC decides whether you need to join based on a return you have already filed, so the 2025 to 2026 return you file by 31 January 2027 is the one that decides whether you join in April 2027. GOV.UK says HMRC reviews each return and writes to people over the threshold, but if you do not get a letter it is still your responsibility to check and sign up.

To sign up, GOV.UK says you must be registered for Self Assessment and have submitted a tax return in the last 2 years. You still file a normal Self Assessment return for the year before you join: if you joined on 6 April 2026, your 2025 to 2026 return is due under the old rules by 31 January 2027.

Partnerships will join later; HMRC says it will set out that timeline in future.

What counts as qualifying income

This is the part people most often get wrong. Qualifying income is your total income from self-employment and property before expenses: turnover, not profit. GOV.UK’s example is £25,000 of rental income plus £27,000 of self-employment income, which makes £52,000 of qualifying income regardless of costs.

A few details from HMRC’s guidance worth knowing:

• Jointly owned property. Only your share counts. If you and a sibling split £50,000 of rent equally, your qualifying income from it is £25,000.
• New sole traders. HMRC annualises a short first period where it can, so six months’ trading is doubled to judge the threshold. Landlords must annualise their own figures.
• VAT-registered on the cash basis. If you include VAT in your declared income, it counts towards qualifying income.
• Ceased sources. Income from a business or property you have stopped still counts if you have another continuing source. If all of it ceased before 6 April 2026, you do not need to use MTD, but tell HMRC if your return does not already show that.

The landlord rules are covered in more depth in our guide to business bank accounts for landlords.

Exemptions

HMRC splits exemptions into automatic ones and ones you apply for, and into permanent and temporary. If you are exempt you still file a Self Assessment return as before. The automatic exemptions include:

• qualifying income of £20,000 or less;
• not having a National Insurance number before the start of the tax year;
• filing on behalf of certain entities, such as trusts and non-resident companies, or acting as a personal representative of someone who has died;
• until at least April 2027, people whose 2024 to 2025 return claimed averaging relief as an individual or qualifying care relief, or included the trusts and estates or residence pages.

You can also apply for an exemption if you are digitally excluded. GOV.UK says that means it is not reasonable for you to use compatible software, for example because your age, health or a disability stops you using a computer or phone, because your religious beliefs are incompatible with digital records, or because you cannot get internet access at home, at work or anywhere suitable. Having filed on paper before is not enough on its own. The full list is on GOV.UK’s exemptions page, and HMRC’s online tool checks your situation against it.

Quarterly updates and deadlines

Every three months your software adds up your digital records into totals for each income and expense category. That summary is the quarterly update. GOV.UK stresses that these are summaries, not tax returns: you do not need to make accounting or tax adjustments, and HMRC does not see individual receipts or invoices.

Points worth knowing:

• Each update is cumulative. It covers the tax year to date, so you can correct an earlier quarter’s mistakes without resending it.
• Nil updates are still required. If you had no income or expenses in a period, you must still send an update.
• Calendar periods suit businesses with a 31 March year end, but you must choose them before your first update and cannot switch mid-year.
• You can send early, up to 10 days before the period ends if you expect no more transactions, or more often than quarterly if your software allows.
• You get an estimate. After each update you can see an estimated tax bill, which is useful for deciding how much to set aside.

The end-of-year tax return

After the fourth update, you make any accounting and tax adjustments, add other income such as employment, savings or dividends, and submit your tax return through your software. Older HMRC material called this the “final declaration”; current guidance simply calls it submitting your tax return. The deadline is unchanged: 31 January after the end of the tax year, which is also when any tax owed is due. Your first MTD return, for 2026 to 2027, is due by 31 January 2028.

If you need to fix something after submitting, GOV.UK says you can amend the return in your software within 12 months of the submission deadline.

Penalties

MTD brings a new penalty system that replaces the old Self Assessment penalties from the year you join. HMRC’s penalties guidance sets it out.

Late payment penalties come on top of late payment interest. In your first year, HMRC gives you 30 days from the due date to pay in full or set up a payment plan before penalties start; after that the window is 15 days. Late payment penalties do not apply to payments on account. If you are also VAT registered, your MTD for Income Tax points are counted separately from your VAT points.

The 2026 to 2027 grace on quarterly updates is generous but not a free pass: you cannot submit your tax return until the updates are in, and late returns still earn points.

Compatible software

GOV.UK says you, or an agent, will need to use commercial software that can create and store digital records, send quarterly updates and submit your return. GOV.UK describes two types:

• Software that creates records, often by linking to your business bank account and importing transactions, scanning receipts or manual entry.
• Bridging software that connects to existing records, such as a spreadsheet, and makes the submissions.

You can combine products, but only one per submission: a landlord cannot split one property business’s updates across two products. GOV.UK says free products exist for simple tax affairs, sometimes with limits such as a cap on transactions. Before choosing, check that the product supports all your income sources, works with your update periods, and appears in HMRC’s software finder.

The point that matters most in practice is the bank feed. Software that reads a clean business account feed does most of the record-keeping for you; a personal account mixed with business transactions means sorting every line by hand each quarter. That is one reason our guide to whether sole traders need a business bank account leans towards yes once MTD applies.

Limited companies are not affected

MTD for Income Tax is for individuals. A limited company pays Corporation Tax on its profits, and GOV.UK lists dividends, including those from your own company, and PAYE income among the sources that do not count towards qualifying income. So a director whose income is a salary and dividends from their company is outside it.

Two exceptions to watch: a director who also lets a property, or who has a separate sole trader business, may need MTD for that income if it is over the threshold on its own. Companies that are VAT registered already keep digital records and file VAT returns under MTD for VAT, which is a separate regime. Our guide to paying yourself from a limited company covers how directors’ income is taxed instead.

Where your bank account fits in

Some business accounts now include MTD software directly. Monzo Business offers free Making Tax Digital for Income Tax software, built on Sage, available on every plan including free Lite. Monzo describes it as HMRC-recognised and says it lets you store digital records and send quarterly updates from the app. It is for sole traders and landlords only: Monzo’s own page says, “Have a limited company? This one’s not for you.” It does not file VAT or Corporation Tax.

If you want money set aside automatically as well, Monzo’s Tax Pots on Pro (£9 a month) and Team move a percentage of each incoming payment into a separate pot, with up to 3 Tax Pots per account. Our tax set-aside calculator suggests what percentage to use, and the page on Monzo Business and Making Tax Digital looks at the built-in tool in more detail, including whether it can replace separate accounting software.

Whichever software you choose, check it in HMRC’s software finder and make sure it supports every income source you have. If you are comparing accounts, our guides for sole traders and freelancers cover which providers have MTD tools or integrations with the main accounting packages.