Making Tax Digital for Income Tax Self Assessment is the biggest change to how sole traders and landlords report to HMRC in a generation. It replaces one annual return with quarterly digital updates plus a final declaration. This guide sets out who is affected, when, and what it means in practice.
The timetable
MTD for Income Tax is being introduced in stages, based on your qualifying income:
- April 2026 — qualifying income above £50,000
- April 2027 — qualifying income above £30,000
- April 2028 — qualifying income above £20,000
HMRC looks at the tax return for the year two years before the start date to decide whether you are in scope. So your 2024/25 return determines whether you join in April 2026.
What counts as qualifying income
This is the part that catches people out. Qualifying income is your gross income from self-employment and property, added together, before any expenses are deducted.
A landlord with two properties bringing in £28,000 of rent and a small consultancy sideline turning over £24,000 has qualifying income of £52,000 — and is in scope from April 2026 — even though actual profit after mortgage interest, letting agent fees and running costs might be a fraction of that.
What you will have to do
Three things change:
- Digital records. Income and expenses must be recorded digitally using compatible software. Paper records and standalone spreadsheets that are retyped will no longer satisfy the requirement.
- Quarterly updates. Four submissions a year sending HMRC your cumulative income and expense totals. These are not tax calculations and nothing becomes payable off the back of them.
- A final declaration. After the year end you confirm the figures, add anything outside self-employment and property, claim reliefs, and finalise the position. This replaces the Self Assessment return.
What does not change
Your payment dates. Tax is still due on 31 January, with payments on account on 31 January and 31 July as now. Quarterly updates are reporting, not paying — a point worth being clear about, because the phrase “quarterly” has caused a lot of unnecessary alarm.
Your accounting rules do not change either. The same expenses are allowable and the same reliefs apply.
Exemptions
You may be exempt if it is not reasonably practicable for you to use digital tools because of age, disability, location or religious belief. Exemption is not automatic — you have to apply to HMRC and be granted it. Some categories of taxpayer, including certain trustees and partnerships with corporate partners, are also outside the initial scope.
What to do now
If you expect to be in scope in April 2026, the useful step is to move onto compatible software this year rather than next. Running it for a full year before it becomes compulsory means the first quarterly submission is routine rather than an emergency, and it gives time to sort out bank feeds, categorisation and any historical mess without a deadline attached.
We set clients up on QuickBooks, Xero or FreeAgent with connected bank feeds and receipt capture. If you would like to know whether you are in scope and what it would take to be ready, get in touch for a free initial consultation.
TAG Accountancy Team
Expert accountants and tax specialists based in Norwich, Norfolk. Helping businesses across the UK manage their finances with confidence.
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