If your gross income from self-employment or property is above £50,000, the way you report to HMRC has already changed. MTD for Income Tax went live on 6 April 2026. It replaces the single annual tax return with digital records and quarterly updates. HMRC has been writing to affected taxpayers in stages since September 2026, so if a letter has landed on your doormat, this is why.
Key facts
- MTD for Income Tax took effect on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, based on the 2024/25 return.
- The threshold falls to £30,000 from April 2027 and to £20,000 from April 2028.
- Qualifying income is your gross self-employment and property income combined, before expenses.
- You keep digital records, send HMRC a quarterly update through compatible software, and file a final year-end submission.
- HMRC is not issuing penalty points for late quarterly updates in 2026/27, but year-end deadlines still carry penalties.
What is MTD for Income Tax?
MTD for Income Tax stands for Making Tax Digital for Income Tax. It is the biggest change to self-employed reporting since Self Assessment arrived in 1996/97. The old pattern was one tax return after the year ended. Now you keep digital records and send HMRC a summary of income and expenses every quarter. A final declaration then confirms the year’s figures and applies any reliefs.
It has been a long time coming. The government first announced Making Tax Digital in March 2015. It planned to extend the scheme to income tax in 2018, then delayed it twice before settling on April 2026. The delays are over, and the system is now running. The logic is the same as VAT: HMRC wants income data through software, close to the point you earn it, not pieced together once a year.
Who is affected, and when?
Entry depends on your qualifying income, and the thresholds come down in three stages. If your 2024/25 return showed qualifying income over £50,000, you are in the system now. Those over £30,000 join from 6 April 2027, based on the 2025/26 return. Those over £20,000 follow from 6 April 2028, based on the 2026/27 return.
Notice how that works. A return you have already filed, or are about to file, decides each start date. By the time HMRC contacts you, the figure that put you over the threshold is already behind you. It pays to know your position before the letter arrives, not after.
HMRC began contacting the £50,000 group in September 2026, by letter and through online tax accounts. It is signing people up in stages rather than all at once. If you have recently gone self-employed and are unsure where you stand with HMRC, start with our guide to what happens after you register as self-employed. MTD will reach you once your income crosses the threshold.
You can check your own position against HMRC’s eligibility criteria on GOV.UK.
What counts as qualifying income?
Qualifying income is based on turnover, not profit. It is your gross income from self-employment and property combined, before you deduct expenses. This catches people out, because a modest profit can sit on top of a large turnover. HMRC’s own example makes the point. £25,000 from self-employment plus £27,000 of rent is £52,000 of qualifying income. That is over the threshold even if the profit on both is far smaller.
Employment income taxed through PAYE, dividends, the State Pension and private pensions do not count. Nor does your share of partnership income. A director paid through salary and dividends sits outside MTD for Income Tax entirely. The exception is a director who also has self-employment or rental income over the threshold.
What landlords need to know
Landlords are in scope on the same terms as the self-employed. For many, this is the first time HMRC has asked for anything during the year. Rental income counts at the gross figure, before letting agent fees, repairs, insurance or any other costs come off. A landlord with three properties bringing in £55,000 of rent is in the system now. That holds even if the profit after costs is a fraction of the rent.
If you own property jointly, only your share of the income counts towards your MTD for Income Tax threshold. A couple splitting £56,000 of rent equally sit at £28,000 each. That keeps both of them out until the £20,000 band arrives in April 2028. The exception is where either one has other income that tips them over sooner.
What changes in practice
Day to day, MTD for Income Tax means three things. You keep your records digitally rather than in a paper ledger or a shoebox of receipts. Every quarter you send HMRC a summary of income and expenses through software that works with MTD. After the year ends, you submit a final declaration in place of the old return. Spreadsheets still have a place, but only with bridging software connecting them to HMRC. A spreadsheet on its own no longer meets the rules.
What does not change
It is worth being clear about what MTD for Income Tax leaves alone. The quarterly rhythm makes people assume more has changed than actually has. The amount of tax you pay is unchanged — the rates, allowances and reliefs are exactly as they were. When you pay is also unchanged. The quarterly updates are information, not bills, and your payment deadlines stay where they are. What has changed is how and how often you report, not what you owe or when you owe it.
Three steps to prepare for MTD for Income Tax
First, work out your qualifying income from your most recent tax return. Remember that it is turnover before expenses, not profit. That one figure tells you whether you are in now, joining in 2027 or 2028, or outside for now.
Second, choose your software early rather than the week before a deadline. GOV.UK keeps a list of software compatible with MTD for Income Tax. The right choice depends on how you work now. Full bookkeeping packages suit a business with regular transactions. A landlord with a handful of rental receipts a month may need something far simpler. If you live in spreadsheets, bridging software may be all you need.
Third, get your records into shape before your first quarter, not during it. Moving a year of paper records into software under deadline pressure is where mistakes happen. It is also where most of the MTD horror stories will come from. This is the work our support services team handles for clients. That runs from choosing software to filing the quarterly submissions on your behalf.
Frequently asked questions
When are the quarterly updates due?
MTD for Income Tax quarterly updates cover the periods ending 5 July, 5 October, 5 January and 5 April. Each update is due by the 7th of the following month. The final declaration keeps the existing 31 January deadline.
Do I pay tax four times a year now?
No — you do not pay tax four times a year under MTD for Income Tax. The quarterly updates tell HMRC what you have earned and spent, but they are not bills. Nothing is due with them. Your payment dates are the same as before, so the change is to your reporting, not your cash flow.
Do I still file a tax return under MTD for Income Tax?
You no longer file a Self Assessment return in the old format. The final declaration at the end of the year serves the same purpose. It brings together your four quarterly updates and adds any other income, such as dividends or savings interest. It then confirms the final tax position.
Can I keep using spreadsheets?
Yes — you can use spreadsheets for MTD for Income Tax, but only with bridging software that connects them to HMRC. The spreadsheet holds the records and the bridging software files the updates. Together they meet the rules where the spreadsheet alone does not.
Does MTD for Income Tax apply to partnerships or limited companies?
No. MTD for Income Tax does not apply to limited companies, and partnership income does not count at this stage. Companies pay corporation tax rather than income tax, and your share of partnership income sits outside qualifying income. The system currently applies to individuals with self-employment or property income. A director only comes into it through income of that kind outside the company.
What if I cannot use software?
HMRC allows exemptions from MTD for Income Tax for people who are digitally excluded. That broadly covers those who cannot use software for reasons of age, disability, location or religion. You have to apply for the exemption rather than assume it. If you think it covers you, resolve it before your start date rather than after.
Will MTD for Income Tax penalties apply in the first year?
HMRC will not issue penalty points for late MTD for Income Tax quarterly updates during 2026/27, while the system beds in. The deadlines and penalties for the year-end submission and for paying your tax still apply in full. The soft landing covers the quarterly rhythm and nothing else.
If you want to know where you stand before HMRC’s letter arrives, send us a message. We will work out your start date and what your records need between now and then.
