Making Tax Digital for Income Tax: what’s changing and what you need to know

What is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) is the HMRC initiative to modernise the UK tax system by moving from annual reporting to more frequent digital reporting. MTD for VAT is already fully in force, and since 6 April 2026 digital requirements have been extending to Income Tax for sole traders and landlords. Under MTD for Income Tax, taxpayers in scope need to:

• Keep digital records of income and allowable expenses
• Use software compatible with MTD for bookkeeping and reporting
• Submit quarterly updates of income and expenses to HMRC
• File their tax return through the software by 31 January after the end of the tax year

This complements the Self Assessment process by spreading data reporting throughout the year rather than relying on one annual submission.

Timeline: April 2026, April 2027 and April 2028

MTD for Income Tax started on 6 April 2026 and is being brought in over three years. Whether you’re in scope depends on your qualifying income (your total income from self-employment and property) on an earlier tax return.

Start date	Qualifying income	Based on your tax return for	Who is brought in
6 April 2026 (started)	Over £50,000	2024/25	Sole traders and landlords whose combined self-employment and property income is over £50,000
6 April 2027	Over £30,000	2025/26	The scope widens to those with income over £30,000
6 April 2028	Over £20,000	2026/27	The scope widens again to those with income over £20,000

Everyone in scope must keep digital records, send quarterly updates and file their tax return through compatible software.

What it means for taxpayers

• Instead of reporting once a year, you share quarterly updates of your income and expenses: rolling snapshots of your year-to-date position. For the standard quarters the updates are due by 7 August, 7 November, 7 February and 7 May.
• Record-keeping must be digital and work with MTD-compatible software. Spreadsheets are fine as long as they are digitally linked to compatible bridging software; manual ledgers, or copying figures across by hand, are not.
• Your tax return is still due by 31 January after the end of the tax year, and must be submitted through your software, bringing together your quarterly updates and your overall tax liability.
• MTD does not change the way you pay tax or the dates payments are due.
• Late submissions are dealt with under a points-based penalty system. If you had to start on 6 April 2026, HMRC will not apply penalty points for late quarterly updates in the first tax year (2026/27), but penalties still apply for a late tax return or a late payment.

Key steps to get ready

1. Check your income. Look at your combined self-employment and property income to see whether you’re already in scope (over £50,000 on your 2024/25 return) or will be from April 2027 (over £30,000) or April 2028 (over £20,000).
2. Choose compatible software. Select accounting or bookkeeping software that is MTD-compatible and supports quarterly updates, record-keeping and your tax return. Bridging software can connect to records you keep in spreadsheets.
3. Digitise your records. Convert your existing income and expense records into digital format and make sure they work with your MTD software.
4. Sign up. Sign up for MTD for Income Tax with HMRC, linking your tax agent if you have one. From September 2026 HMRC has started signing up people who need to use MTD for 2026/27 and have not signed themselves up, so it is better to do it yourself and make sure your details are right.
5. Adapt your processes. Build habits to record transactions digitally as they happen, review your figures every quarter, and keep on top of the deadlines.
6. Review your software regularly. As HMRC’s requirements evolve, software providers update their products. Stay vigilant.

How we can help you prepare

Assessment and forecasting. We’ll check whether your income puts you in scope now, from 2027 or from 2028, and forecast how this will affect your tax and cash flow.

Software recommendation and setup. We advise, compare and help you set up MTD-compatible software (or bridging tools) that suits your business and the way you work.

Data migration and clean-up. We help convert historic records into digital form, check their accuracy and make sure they import smoothly into your new system.

Quarterly reporting support. We help you set up the process for quarterly submissions, reconcile your data, and make sure each update is accurate.

Tax return and year-end reconciliation. At year end, we help bring the quarterly updates together into your tax return, so your tax liability is correctly worked out.

Ongoing monitoring. As HMRC rules or software requirements change, we keep track and keep your system compliant.

Want to talk through where you stand? Book a free consultation or read more about our Self Assessment service.