Making Tax Digital for Income Tax explained
What MTD is, who it covers from April 2026 onwards, and what changes for sole traders and landlords. Rules as at 2026/27.
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What Making Tax Digital for Income Tax is
Making Tax Digital (MTD) for Income Tax replaces the once-a-year Self Assessment return for sole traders and landlords over an income threshold. Instead of gathering a year of records in January, you keep them digitally as you go and send HMRC a short summary every quarter, then confirm the year in a final declaration.
Three things do not change: how much tax you pay, the rates it is worked out on, and when it is due. The payment dates stay 31 January and 31 July, so the Self Assessment deadlines for paying are the same under MTD.
The timeline
MTD phases in by qualifying income: gross self-employment plus property income, before expenses. Each phase is decided on the return two years before it starts.
| Phase starts | Qualifying income | Judged on | First quarterly update | First final declaration |
|---|---|---|---|---|
| 6 April 2026 | Over £50,000 | 2024/25 return | 7 August 2026 | 31 January 2028 |
| 6 April 2027 | Over £30,000 | 2025/26 return | 7 August 2027 | 31 January 2029 |
| 6 April 2028 | Over £20,000 | 2026/27 return | 7 August 2028 | 31 January 2030 |
| No date set | £20,000 or less | - | - | - |
Not sure which row is yours? The Making Tax Digital checker works it out from one number.
Who it covers
- In: sole traders and landlords, including people with a salary as well, whose self-employment and property income together is over the threshold. Jointly owned property counts at your share.
- Not in: limited companies, employees with no self-employment or property income, and partnerships (not yet). Some people can apply for an exemption, for example if age, disability, location or religion means they cannot use digital tools.
What changes once you are in
- Digital records. Record each business income and expense digitally as it happens, in software or a spreadsheet, rather than totting up paper at the end of the year.
- Recognised software. Use software that works with Making Tax Digital for Income Tax: HMRC's software finder lists the products it recognises, some of them free. A spreadsheet works if you add bridging software to send the figures.
- Quarterly updates. Send a summary of your income and expenses to HMRC every three months, due 7 August, 7 November, 7 February and 7 May. They are not tax returns and you pay nothing with them.
- Final declaration. By 31 January after the tax year, confirm your figures, add any other income and claim reliefs. It replaces the Self Assessment tax return; the payment dates stay 31 January and 31 July.
Penalties
Late quarterly updates and a late final declaration fall under HMRC's points-based penalty system instead of the fixed £100 and daily penalties of the old return. Each late submission earns a point; for quarterly updates, reaching 4 points brings a £200 penalty, and every later late update another £200 until you clear the points by sending everything on time for a period. HMRC has said it will not give penalty points for late quarterly updates in 2026/27, the first MTD year. Late tax is charged under its newer late-payment penalties, plus interest.
The dates themselves, and what each update contains, are in the quarterly updates guide. When you know your start date, the six-month preparation plan takes you from here to your first update.
Get your income into a digital record now
The hardest MTD habit is recording income as it arrives instead of at year end. Invoicing through this site builds that record for you: every invoice numbered and dated, every payment logged, and a running estimate of the tax on it. It is not MTD software and sends nothing to HMRC, so you still need software for the quarterly updates.
- Clean, numbered invoices in about a minute, with a PDF at the end.
- Every invoice, payment and due date in one place each quarter.
- A live set-aside figure for the income tax and National Insurance on what you have been paid.
No password and no card. Enter your email, click the link we send, and you are in.
Frequently asked questions
What is Making Tax Digital for Income Tax?
It is how sole traders and landlords over an income threshold now report to HMRC: digital records, a summary sent every three months from compatible software, and a final declaration after the year ends in place of the Self Assessment tax return. It does not change how much tax you pay or when you pay it.
When does Making Tax Digital start for sole traders?
From 6 April 2026 if your qualifying income was over £50,000 in 2024/25; From 6 April 2027 if your qualifying income was over £30,000 in 2025/26; From 6 April 2028 if your qualifying income was over £20,000 in 2026/27. No date has been set for incomes of £20,000 or less.
Does Making Tax Digital mean I pay tax every quarter?
No. Quarterly updates are summaries of income and expenses, not payments. Your tax is still paid on 31 January and 31 July, through payments on account and a balancing payment, exactly as under Self Assessment.
Does Making Tax Digital apply to limited companies or employees?
No. It covers individuals with self-employment or property income. Limited companies are outside it, and income taxed through PAYE does not count towards the threshold. Partnerships are not in it yet.
What are the penalties for Making Tax Digital?
Late quarterly updates and a late final declaration earn penalty points rather than fixed fines. For quarterly updates, reaching 4 points brings a £200 penalty, and each later late update another £200. Points expire after a period of sending everything on time. HMRC has said it will not give points for late quarterly updates in 2026/27, the first year.
Is there free Making Tax Digital software?
HMRC does not provide its own, but its software finder lists recognised products, and some have free versions, typically for simple affairs. If you keep records in a spreadsheet, bridging software can send the figures for you. Check what each free version covers before you rely on it.
Tools sole traders use
Accounting software that keeps your records ready for Self Assessment and Making Tax Digital.
- Xero - Online accounting with bank feeds and invoicing, widely used by UK accountants.
- QuickBooks - Bookkeeping and invoicing software with features for sole traders.
- Sage Accounting - UK accounting software for invoices, expenses and VAT returns.
Affiliate links: we may earn a commission if you sign up, at no extra cost to you.
Sources
Making Tax Digital guides
- Making Tax Digital checker: enter your qualifying income to see whether you are in, from when, and your first quarterly deadline.
- MTD quarterly updates: the 7 August, 7 November, 7 February and 7 May deadlines and what each update contains.
- Preparing for Making Tax Digital: a month-by-month plan for the six months before your phase, including the free software options.
- Self Assessment deadlines 2026/27: every filing and payment date, which MTD does not move.
- Payments on account calculator: what you pay on 31 January and 31 July, under MTD or not.