Who has to use Making Tax Digital for Income Tax
MTD for Income Tax applies to individuals who have income from self employment, property or both. HMRC looks at your qualifying income, which is your total turnover from self employment plus your total rental income before any expenses are taken off. Wages, pensions and dividends do not count towards it.
The rules are coming in stages. From 6/4/2026, you are in if your qualifying income is over £50,000. From 6/4/2027 the level drops to over £30,000, and from 6/4/2028 to over £20,000. HMRC uses an earlier tax return to decide, so the figures on the returns you file now decide when you join.
This catches plenty of people who do not think of themselves as running a business. A landlord with two flats in Parsons Green let at local rents can easily pass £30,000 of rent, even if the profit after mortgage costs is small. The test is on the gross income, not the profit.
What changes in practice
Under MTD you must keep your records in software that works with HMRC, or in spreadsheets linked to bridging software. Every three months you send HMRC a summary of your income and expenses. After the end of the tax year you confirm your final figures and add any other income, such as wages or interest, through the software.
The quarterly updates for the standard periods are due by 7/8, 7/11, 7/2 and 7/5. The final tax return is still due by 31/1 after the tax year ends, and the tax is still paid on the usual dates. MTD changes how you report, not how much tax you owe.
- Quarter to 5/7: update due by 7/8
- Quarter to 5/10: update due by 7/11
- Quarter to 5/1: update due by 7/2
- Quarter to 5/4: update due by 7/5
What is included
- Checking whether and when MTD applies to you
- Software recommendation and setup
- Linking your software to HMRC
- Bank feed and category setup
- Quarterly updates sent to HMRC on your behalf
- Year end final return and tax calculation
- Joint property income split correctly
- Reminders before each quarterly deadline
Penalties for late updates
HMRC has said that for the 2026/27 tax year, late quarterly updates will not earn penalty points, although late tax returns still do. From the following year, each missed quarterly deadline earns a point, and a £200 penalty is charged once you reach 4 points.
The first year is a good time to get a routine in place while the penalty risk is lower. We would not advise treating it as a year off, because the habits you set now are the ones you will keep.
Choosing software that suits you
There is no single right product. A sole trader with a handful of invoices a month needs something simple. A landlord with jointly owned properties needs software that handles shares of income properly. A builder or a shop with stock and VAT needs a fuller package.
We start by looking at how you keep records now. If you already use a spreadsheet that works, bridging software may be enough. If you are on paper or a shoebox of receipts, we will recommend software and set it up with you, including your bank feed and the right income and expense categories.
Common mistakes we are seeing
Some people assume they are not affected because their profit is low. As explained above, the test is on gross income. Others think an accountant can still send one figure once a year as before. The quarterly updates must come from digital records kept through the year.
Joint owners are another source of confusion. A married couple who own a flat in Sands End together each count their own share of the rent towards their qualifying income. We also see people with two sources, such as a small trade and a rental flat, who forget that the two are added together for the test.
How we handle MTD for you
Once you are set up, you keep your receipts and invoices coming in through the software or by uploading them. Each quarter we review the records, ask about anything unclear and send the update to HMRC as your agent. After the tax year, we prepare your final return, bringing in any other income you have, and tell you what to pay and when.
Fees are fixed and agreed before any work starts, after a free review of your records and your likely start date. If you are a VAT registered business, MTD for VAT has applied to you for some time, and we can bring your VAT returns into the same routine.
Who this suits
- Sole traders with turnover close to or above £30,000
- Landlords with rent from one or more properties
- People with both a trade and rental income
- Self employed people moving off paper records
- Joint property owners who are unsure how MTD applies
Common questions
Does Making Tax Digital apply to me if I am a landlord?
It can. If your rental income before expenses, added to any self employment turnover, is over the level for that year, you will need to join. From 6/4/2027 that level is £30,000, which many London landlords pass with one or two properties.
Do I still need to do a tax return under MTD?
Yes, in a new form. After the tax year you confirm your final figures and add any other income through MTD software. The deadline is still 31/1 after the end of the tax year.
Can I keep using spreadsheets for Making Tax Digital?
You can, as long as you use bridging software to send the figures to HMRC digitally. It works for simple records, but many people find proper software easier once they see how often the updates are due.
Does MTD mean I pay tax every quarter?
No. The quarterly updates are reports only. Your tax is still paid through the usual self assessment dates, including payments on account where they apply.
Does my limited company have to use MTD for Income Tax?
No. MTD for Income Tax is for individuals with self employment or property income. A limited company files its own corporation tax return, although it must use MTD for VAT if it is VAT registered.
Can an accountant send the quarterly updates for me?
Yes. Once you authorise us as your agent, we can send each quarterly update and your final return. You still need to keep your records up to date so the updates are accurate.
When will I know if I have to join MTD for Income Tax?
HMRC uses the figures on an earlier tax return to decide, and it may write to you. Do not wait for a letter. If your self employment and rental income together are near the next level, we can check your position from your recent returns.
What if I am not good with computers?
HMRC lets some people apply for an exemption if it is not reasonably practical for them to use digital tools, for example because of age, disability or where they live. We can talk you through whether that may apply before you apply.