MTD for Income Tax: who must join, when, and what you need to do

Making Tax Digital for Income Tax (often shortened to MTD for Income Tax or MTD for IT) is HMRC's new way for sole traders and landlords to report their income. Instead of one tax return a year, you keep your records in software and send HMRC a short summary of your income and expenses every three months. You still file a return at the end of the year, but most of the work is already done by then.

It does not change how much tax you pay. Your allowable expenses, tax rates and the 31 January payment date stay the same. What changes is how you keep records and how often you report. If you already send a yearly Self Assessment return, MTD for Income Tax is built on top of it.

MTD for Income Tax applies to people registered for Self Assessment who have income from self-employment, property, or both. Whether you must join depends on your qualifying income and HMRC brings people in over three years.

Partnerships will join later. HMRC has not yet announced a date for them.

HMRC writes to people it expects to join, using the figures on their past returns. Do not rely on the letter alone. If your return shows you are over a threshold, the rules apply to you whether or not a letter arrives.

Qualifying income is your gross income from self-employment plus your gross income from property, added together. Gross means before expenses. For a sole trader that is turnover (sales). For a landlord it is the total rent received. Your profit does not decide whether you join.

Income that is not from self-employment or property does not count towards the threshold. So a salary from a job, a pension, dividends and bank interest are left out of the test, even though they still go on your tax return.

Once you are in, there are three jobs: use compatible software, keep digital records, and send quarterly updates. Then you finish the year with your tax return.

• Compatible software. This is software HMRC recognises as able to send MTD updates. Many bookkeeping packages do this, and some "bridging" tools link a spreadsheet to HMRC. We work with Xero, QuickBooks, Sage, FreeAgent and spreadsheets, and our software page explains the options.
• Digital records. Each sale, rent receipt and business expense is recorded in the software (or a linked spreadsheet) with its date, amount and category. Paper notebooks and shoeboxes of receipts are no longer enough on their own.
• Quarterly updates. Every three months your software sends HMRC a summary of your income and expenses. It is a summary, not a tax bill, and there is no payment due with it.
• Tax return (final declaration). After the year ends you add any other income, claim reliefs and confirm the figures. This is due by 31 January after the tax year, as now.

The deadlines are the same whichever option you choose. Calendar quarters can be easier if your bank statements and bookkeeping already run to month ends.

If you joined on 6 April 2026, your first update was due by 7 August 2026 and the next one, for the period to 5 October, is due by 7 November 2026. Your 2026/27 tax return is then due by 31 January 2028. If you join in April 2027, your first update is due by 7 August 2027.

MTD uses a points system for late quarterly updates rather than an instant fine.

• 2026/27: penalty points for late quarterly updates are not applied. This gives people in the first group a year to get used to the system.
• From 2027/28: each missed quarterly update earns one point.
• At 4 points: you get a £200 penalty.

Some people do not have to use MTD for Income Tax. The main group is people who are digitally excluded, which broadly means it is not reasonably practical for them to use software, for example because of age, disability, where they live or a religious objection. You usually need to apply to HMRC for this exemption rather than assume it.

If you are exempt, you still file a normal Self Assessment return each year by the usual deadlines. You simply do not send quarterly updates. If you think an exemption might apply to you, talk to us before the date you would otherwise join.

1. 1

   Work out your qualifying income

   Add your turnover and gross rent from your latest tax return. Compare the total with the £50,000, £30,000 and £20,000 thresholds to find your start date.

2. 2

   Choose your software

   Pick software that is compatible with MTD for Income Tax and suits how you work. If you like spreadsheets, check a bridging option is available.

3. 3

   Separate business and personal money

   A dedicated bank account for your business or lettings makes digital records far quicker, especially if the software reads bank feeds.

4. 4

   Start keeping digital records early

   Run a few months in the software before your start date. It is easier to fix habits when nothing is due yet.

5. 5

   Sign up and diarise the deadlines

   Sign up for MTD for Income Tax before your first quarter and put 7 August, 7 November, 7 February and 7 May in your calendar, plus 31 January for the tax return.

6. 6

   Review at year end

   Check the four quarters, add any other income and reliefs, and file the final return on time.

Landlords have a few extra points to think about, such as jointly owned property and letting agent statements. Our guide to Making Tax Digital for landlords covers them.

Our MTD for Income Tax service takes the whole job off your hands. We check whether and when you must join, set up software that suits you, show you how to record transactions (or do the bookkeeping for you), send the quarterly updates and file your tax return. If you are self-employed or a landlord, we can usually keep your current spreadsheet or app and link it in.

We are a two-person practice led by an ICAEW Chartered Accountant, so you speak to the person doing the work. Our fees are fixed and monthly, from £99 for self-employed people and landlords, and you can see them on our fees page. If you would like to talk it through, book a free 20-minute chat and we will confirm your exact price in writing within one working day.