Making Tax Digital for Income Tax: Who Must Join and When

Making Tax Digital (MTD) for Income Tax changes how sole traders and landlords report to HMRC. Instead of one Self Assessment return pieced together after the year ends, you keep digital records in compatible software, send HMRC a short update every quarter, and file the year-end tax return from the same software. It went live on 6 April 2026. The tax rules, and the dates you pay, stay the same.

Who has to use Making Tax Digital for Income Tax, and when?

It depends on your qualifying income in an earlier tax year:

• over £50,000 in 2024-25: from 6 April 2026
• over £30,000 in 2025-26: from 6 April 2027
• over £20,000 in 2026-27: from 6 April 2028

The test uses your return for the tax year two years before the one in which you would join, which is why the 2026-27 figures decide April 2028. Partnerships are not included yet; HMRC will set out their timetable later. You can join voluntarily before you have to, and HMRC has said that from September 2026 it will sign up people whose records show they should already be using it.

What counts as qualifying income?

Qualifying income is your gross income from self-employment and property before expenses: turnover, not profit. It adds together every sole trade and every property business, UK and overseas. If you own a property jointly, only your share counts. Nothing else counts, so salary, pensions, dividends and your share of partnership profits are left out.

So a landlord collecting £32,000 of rent with £15,000 of costs has qualifying income of £32,000, not £17,000, and is over the £30,000 line.

What do you have to send HMRC?

• Digital records of business income and expenses, kept in software that works with MTD. There are free and paid products, and bridging software can connect a spreadsheet.
• Quarterly updates for each business. The standard quarters end on 5 July, 5 October, 5 January and 5 April, or you can choose calendar quarters ending on the last day of June, September, December and March. Either way the deadlines are 7 August, 7 November, 7 February and 7 May. Updates are cumulative, so each covers the year to date and can correct the one before, and each gives an estimate of the tax building up.
• A tax return after the year ends, with any adjustments and your other income, such as salary, dividends and gains, due by 31 January. Early guidance called this the final declaration; HMRC now simply calls it your tax return.

Quarterly updates do not change when you pay: the balance is still due on 31 January, with payments on account on 31 January and 31 July where they apply. The return for the year before you join is filed the old way.

How do penalties work under Making Tax Digital?

Late submissions now earn penalty points. Each missed quarterly update or tax return deadline adds one point, even if you run more than one business. At 4 points you pay a £200 penalty, and another £200 for each further missed deadline while you are at the threshold. Below it, each point expires 24 months after the missed deadline; at the threshold, points are cleared only after 12 months of on-time submissions with nothing outstanding from the previous 24 months.

For 2026-27 there are no points for late quarterly updates, a soft landing for the first year. A late tax return still earns one.

Late payment penalties change too. They are a percentage of tax still unpaid 15 days after the due date, rising if it is still unpaid after 30 days and then building up daily, with interest charged from the first day. In your first year HMRC allows 30 days before the first penalty, and the government has announced higher percentages from April 2027.

Who is exempt from Making Tax Digital for Income Tax?

Some people are exempt automatically, for example if they have no National Insurance number before the tax year starts, or are acting as the personal representative of someone who has died. Others can apply if they are digitally excluded, meaning it is not reasonable for them to use software because of age, health or disability, location and lack of internet access, or religious beliefs incompatible with digital records. Anyone exempt keeps filing an ordinary Self Assessment return.

Once you are in, you can leave if your qualifying income stays below the threshold for three tax years in a row. CoreFi reads your bank accounts and shows your tax figures as the year goes on.

Whether and when MTD applies to you depends on your own income and circumstances, and an accountant can advise.