Making Tax Digital for Income Tax changes how in-scope sole traders and landlords keep records and report to HMRC. You must keep digital records, send four cumulative quarterly updates through compatible software, then complete and submit your tax return through that software by 31 January. It became mandatory from 6 April 2026 for qualifying income over £50,000, with lower thresholds following in 2027 and 2028.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax, often shortened to MTD for Income Tax or MTD ITSA, is HMRC's digital reporting system for qualifying self-employed people and landlords. Instead of keeping records separately and only dealing with HMRC at year end, people in scope must maintain digital records, send quarterly summaries from compatible software and use that software to complete the annual tax return.
This is an important distinction: MTD does not mean four full tax returns every year. The quarterly updates are summaries of business income and expenses. Your final tax position is dealt with when you complete the tax return after the tax year has ended. HMRC describes MTD as a new way to do Self Assessment rather than the removal of Self Assessment altogether.
Does MTD for Income Tax apply to me?
MTD for Income Tax applies when you are a sole trader or landlord registered for Self Assessment, you receive self-employment or property income, and your qualifying income is above the threshold for the relevant test year. The test looks back at a previous tax return, so you should not decide based only on what you expect to earn in the current year.
| Self Assessment return tested | Qualifying income | MTD start date |
|---|---|---|
| 2024/25 | More than £50,000 | 6 April 2026 |
| 2025/26 | More than £30,000 | 6 April 2027 |
| 2026/27 | More than £20,000 | 6 April 2028 |
For example, HMRC used the 2024/25 Self Assessment return to identify people who should have started MTD on 6 April 2026. If your 2025/26 return shows qualifying income above £30,000, you are due to enter MTD from 6 April 2027. You can use our MTD threshold checker for a quick indication, then confirm it using the official HMRC checker.
How qualifying income is calculated
Qualifying income is broadly your gross self-employment income plus gross property income before expenses. It is turnover, not profit. HMRC can combine more than one self-employment or property source, which means you can cross the threshold even when no single activity is above it on its own.
Employment income through PAYE, dividends, State Pension, private pensions and an individual's share of profit from a partnership do not count towards qualifying income. If you own property jointly, your own share of the property income normally counts rather than the whole property's rent. HMRC has additional rules for annualising short accounting periods, ceased income sources, trusts, tax residence and certain specialist income, so check the official qualifying income guidance if your affairs are more complex.
What actually changes when you enter MTD?
Once you are required to use MTD for Income Tax, the main operational change is that your self-employment and property records must be maintained digitally in compatible software. Your software uses those records to create cumulative quarterly updates, and it is also used at year end to make adjustments, add other income and gains where supported, complete the tax calculation and submit the tax return.
- Keep digital records of self-employment and property income and expenses.
- Use software that works with MTD for Income Tax and is authorised to connect to HMRC.
- Send a quarterly update for each relevant income source.
- Correct or update records through the software when information changes.
- After the tax year, make year-end adjustments and claims before submitting the tax return.
Quarterly updates are cumulative from the start of the tax year to the end of each update period. That means the second update includes activity from the start of the year through the second period, rather than reporting only the previous three months. See our quarterly updates guide for the full deadline calendar.
Key MTD dates and deadlines
For standard update periods, the quarterly update deadlines are 7 August, 7 November, 7 February and 7 May. Businesses using calendar update periods have slightly different period start and end dates but the same submission deadlines. Your tax return is still due by 31 January following the end of the relevant tax year.
| Standard update period | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May following the tax year |
These deadlines are for the quarterly summaries, not tax-payment dates. Your annual tax return and the associated balancing payment remain subject to the normal 31 January deadline. If you are entering MTD in a future phase, begin software and record-keeping preparation before the start date rather than waiting until the first quarterly deadline.
What software will you need?
You need commercial software that works with MTD for Income Tax. HMRC does not provide its own free MTD Income Tax software. The system you choose needs to create, store and correct digital records, send quarterly updates and support the tax-return process you need. Some businesses can keep an existing bookkeeping system and use compatible bridging or connected software, but the workflow must preserve the required digital records.
CFO Accounting can help clients set up and organise cloud bookkeeping, including Xero or QuickBooks workflows where suitable, so records are ready for quarterly reporting rather than being reconstructed at the end of the year. If your records are currently spreadsheet-heavy or incomplete, our bookkeeping service can help create a cleaner starting point.
Are there exemptions?
Some people are automatically exempt and others can apply for an exemption, including certain people who are digitally excluded. An exemption is based on HMRC's rules and your personal circumstances, so being uncomfortable with software does not automatically make someone exempt. If HMRC confirms an exemption, you continue reporting through Self Assessment rather than using the MTD digital obligations.
Examples can include situations where age, disability, health, location or religious beliefs make digital compliance unreasonable, as well as specific automatic exemptions listed by HMRC. Some temporary exemptions also apply to particular categories. Always check the current HMRC exemption guidance because the detail has changed during the rollout.
What happens if you do nothing?
HMRC reviews tax-return information and may write to people it identifies as being over the relevant threshold, but the responsibility to check remains with the taxpayer. If you are in scope and have not received a letter, you should still check your qualifying income, arrange compatible software and complete the sign-up process rather than assuming no letter means no obligation.
HMRC has also introduced penalty rules around MTD. For people who started in 2026/27, HMRC states that it will not apply penalty points for late quarterly updates in that first MTD tax year, although late tax-return and late-payment penalties can still apply. Check the latest penalties guidance before relying on any grace period.
How CFO Accounting can help
MTD is mostly a record-keeping and workflow change. The easiest way to reduce the quarterly pressure is to keep bookkeeping current throughout the year, use software that is correctly configured and know who is responsible for each submission. We can help bring those pieces together rather than treating each quarterly deadline as a separate emergency.
- Bookkeeping: keep digital records current and reconciled.
- Self Assessment: prepare the year-end tax return and review the overall tax position.
- Software setup: organise suitable Xero or QuickBooks workflows around the business.
- Quarterly support: maintain the reporting cycle and prepare information for submission.
- Free consultation: discuss whether you are in scope and what needs to change before your start date.
What your first MTD tax year looks like in practice
Your first MTD year works best when you separate the recurring bookkeeping cycle from the annual tax-return process. From the start of the tax year, keep the required income and expense records digitally. Before each quarterly deadline, review those records and send the cumulative update. After the fourth update, finish the year-end work, add or check the information needed for the tax return, review the calculation and submit through the compatible software by 31 January.
For someone who entered MTD on 6 April 2026 using standard update periods, the first update was due by 7 August 2026, followed by 7 November 2026, 7 February 2027 and 7 May 2027. The annual 2026/27 tax return is then due by 31 January 2028. The deadlines are easier to manage when the bookkeeping is already reconciled before each quarter ends.
How to prepare before your MTD start date
Do not wait for the first quarterly deadline to change your process. Before the tax year begins, confirm whether you are in scope, identify every qualifying self-employment and property source, choose compatible software, decide whether an agent will submit on your behalf and make sure your opening records are complete. If you are moving from paper records or annual spreadsheet catch-up, allow time to clean up bank transactions, invoices, expense evidence and property records before the first reporting period.
It is also worth checking who has access to the software, whether bank feeds are working, how receipts will be captured and how you will separate personal and business transactions. MTD does not remove the need for good underlying records; it makes regular record keeping more visible. A simple monthly routine normally reduces the amount of work needed immediately before each quarterly update.
MTD for Income Tax FAQs
Does MTD mean I file four tax returns a year?
No. The four quarterly updates are cumulative summaries of self-employment or property income and expenses. They are not four complete tax returns. You still complete and submit the tax return after the tax year through your compatible software.
Is the threshold based on profit?
No. The threshold uses qualifying income before expenses, broadly gross self-employment turnover plus gross property income. That is why someone with relatively modest profit can still be in scope if gross receipts are above the relevant threshold.
Do wages or dividends count towards the MTD threshold?
Employment income, dividends, State Pension and private pensions do not count as qualifying income. You may still report relevant items on the annual tax return, but they are not added to the MTD qualifying-income threshold.
What if I am both a sole trader and a landlord?
Gross qualifying income from self-employment and property is combined. If the combined figure is above the relevant threshold, you can be required to use MTD even if neither source exceeds the threshold on its own.
Do jointly owned properties count in full?
Normally your share of the jointly owned property's income counts towards your qualifying income, not the full rent received by the property. HMRC provides specific rules for situations where you only receive a net share after expenses.
Will HMRC sign me up automatically?
No. HMRC may write to you if its review shows you are in scope, but you still need to check your position and complete the sign-up steps. Not receiving a letter does not remove the obligation.
Can I use spreadsheets?
You need a digital record-keeping process that works with MTD-compatible software. Some spreadsheet workflows may be possible with compatible bridging or connected software, but the records and transfer process must meet the digital requirements.
What if my income later falls below the threshold?
Falling below the threshold does not necessarily mean you leave MTD immediately. HMRC's current rules generally require qualifying income to remain at or below the applicable threshold for three consecutive tax years before you can opt out, subject to the detailed rules.
Do partnerships use MTD for Income Tax now?
Partnerships are due to be brought into MTD for Income Tax at a future date, but HMRC has not yet confirmed the timetable. An individual partner's share of partnership profit does not currently count towards their personal MTD qualifying income.