You need to use Making Tax Digital for Income Tax from 6 April 2026 if you are a sole trader or landlord registered for Self Assessment and your qualifying gross income from self-employment and property was more than £50,000 in 2024/25, unless an exemption applies. The threshold falls to more than £30,000 from April 2027 and more than £20,000 from April 2028.
Making Tax Digital has been talked about for so long that I suspect quite a few people stopped listening.
The first mandatory Making Tax Digital for Income Tax quarterly update deadline was 7 August 2026. That understandably prompted a lot of sole traders and landlords to ask a fairly basic question: does this actually apply to me?
For some, the answer is yes now. For others it will be yes from April 2027 or April 2028. And for plenty of people, it does not currently apply at all. The important thing is to work that out from the actual rules rather than assuming that being in Self Assessment automatically puts you into MTD.
Key Takeaways
- MTD became mandatory for the first group of sole traders and landlords from 6 April 2026.
- For 2026/27, the main threshold is qualifying income of more than £50,000, measured using the 2024/25 Self Assessment tax return.
- Qualifying income means gross self-employment and property income before expenses, not taxable profit.
- The threshold falls to more than £30,000 from April 2027 and more than £20,000 from April 2028 under the current timetable.
- Employment income, pensions, dividends and your individual share of partnership profits do not normally count towards the qualifying-income threshold.
- Those within the regime must keep appropriate digital records and use compatible software to submit quarterly updates.
- Quarterly updates do not replace the annual tax return.
- HMRC will not issue penalty points for late quarterly updates during 2026/27, but outstanding quarterly updates still need to be submitted before the tax return can be filed.
- HMRC estimates that around 864,000 sole traders and landlords fall within the first phase, rising to roughly 2.9 million by April 2028 as the threshold drops
(source: GOV.UK, Making Tax Digital business population statistics, February 2026).
What Is Making Tax Digital for Income Tax?
MTD is HMRC’s system requiring certain sole traders and landlords to keep digital business records and send quarterly summaries of income and expenses to HMRC using compatible software, followed by a year-end tax return submitted through the same software.
It replaces the “one big tax return in January” habit with ongoing digital bookkeeping and four short quarterly updates a year, plus a final declaration. MTD does not replace Self Assessment it changes how and when information is reported to HMRC, not whether tax is still calculated and paid annually.
The policy was first announced back in 2015, but the rollout has happened in phases. HMRC figures suggest that in the very first quarterly reporting window under Making Tax Digital for Income Tax, more than 436,000 taxpayers successfully submitted their update on time, an early sign that the system itself works reasonably smoothly for those who are properly set up
(source: HMRC figures cited by Money Week, August 2026).
Three things sit at the heart of MTD:
- Digital record-keeping of business and property income and expenses.
- Quarterly updates sent to HMRC from that digital record.
- A year-end final declaration that replaces the old-style tax return process but is still submitted through compatible software.
Who Has to Use Making Tax Digital for Income Tax in 2026/27?
The starting point is reasonably straightforward.
According to HMRC’s guidance on who must use Making Tax Digital for Income Tax, you are potentially within the regime if you:
- Are an individual registered for Self Assessment;
- Receive income from self-employment as a sole trader, property as a landlord, or both; and
- Have qualifying income above the relevant threshold.
For somebody entering MTD from 6 April 2026, HMRC looks principally at the Self Assessment return for 2024/25. If the qualifying income shown on that return was more than £50,000, MTD generally applies from 6 April 2026 unless you fall within an exemption.
Notice the wording: more than £50,000. It is also important that we are talking about income, not profit. For 2026/27, the question is generally whether your combined gross self-employment and property income for 2024/25 exceeded £50,000 – not whether you made £50,000 profit.
What Counts as Qualifying Income for MTD?
Qualifying income for MTD is your total gross income from self-employment and property before deducting any expenses not your taxable profit.
That distinction can make an enormous difference.
Imagine a sole trader with:
| 2024/25 | Amount |
|---|---|
| Sales | £68,000 |
| Allowable business expenses | £31,000 |
| Profit | £37,000 |
It would be easy for that person to say: “My business only makes £37,000. MTD doesn’t apply to me.” But the relevant figure for this purpose is generally the £68,000 turnover, not the £37,000 profit. They can therefore be within MTD even though their actual taxable business profit is comfortably below £50,000.
The same principle applies to landlords. We are generally interested in gross property income before expenses rather than the eventual rental profit on which tax is calculated. That is why looking at the bottom line of your accounts is not enough.
What If I Have More Than One Business or Rental Property?
Qualifying income can be aggregated.
Suppose somebody has:
- £32,000 gross income from self-employment; and
- £24,000 gross rental income.
Neither source individually exceeds £50,000.
Together, however, the qualifying income is £56,000.
HMRC’s own guidance gives a similar example involving £25,000 of rental income and £27,000 of self-employment income. The combined £52,000 is qualifying income for MTD purposes.
Jointly owned property needs a little more care. Broadly, it is your share of the property income that is considered rather than the entire rent generated by the property. HMRC gives the example of two people equally owning a property producing £50,000 of income: each has £25,000 counting towards their qualifying income.
This is one reason we would rather check the underlying figures than simply ask a client, “Are you over £50,000?”
What Income Does Not Count Towards the Threshold?
Not every pound appearing on your tax return counts.
HMRC currently excludes a number of other income sources when calculating qualifying income, including:
- Employment income taxed through PAYE;
- Dividends, including dividends from your own company;
- State Pension income;
- Private pension income; and
- Your individual share of profits from a partnership.
That can produce some results that initially seem odd.
Someone earning £45,000 through PAYE and receiving £15,000 of rental income does not have £60,000 of qualifying income simply because their total gross income is £60,000. The employment income does not count towards the MTD qualifying-income calculation.
Conversely, somebody with no salary at all but £55,000 of gross rental receipts may be caught even where mortgage interest and other property costs leave them with a much smaller amount of actual disposable income. Again, gross qualifying income and taxable profit are different things.
For anyone with foreign property, jointly owned property, trusts, several businesses or unusual income sources, I would check the position rather than relying on a rough calculation.
When Does the Making Tax Digital for Income Tax Threshold Drop?
The threshold falls from more than £50,000 (April 2026) to more than £30,000 (April 2027) and more than £20,000 (April 2028), so being outside MTD now does not mean you can ignore it going forward.
The current HMRC timetable is:
| Tax return used to test income | 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 |
A landlord with £38,000 of qualifying income may have escaped the first wave, for example, but could come into the system from April 2027 depending on the figures reported for 2025/26.
HMRC reviews Self Assessment information to determine whether taxpayers are above the relevant threshold and says it will write to those it identifies. However, HMRC also makes clear that not receiving a letter does not remove your responsibility to check whether Making Tax Digital for Income Tax applies to you.
By the time the £20,000 threshold takes effect in April 2028, industry estimates put the total population within MTD at close to 2.9 million sole traders and landlords, up from around 864,000 in the first phase
The £50,000 threshold is only the first stage: under the current timetable it falls to £30,000 in April 2027 and £20,000 in April 2028.
What Do I Actually Have to Do Under Making Tax Digital for Income Tax?
If you’re within MTD, you or your agent need compatible software to keep digital records, send four quarterly updates a year, and complete the year-end tax return process it is not four separate tax returns. Common MTD-compatible options include Xero, QuickBooks, FreeAgent and Sage, among others on HMRC’s recognised software list.
This is where some of the headlines make the system sound either far more frightening or far less significant than it really is. MTD is not simply “four tax returns a year”. If you are required to use it, you or your agent need compatible software capable of:
- Creating, storing and correcting digital records of relevant income and expenses
- Sending quarterly updates to HMRC
- Completing the year-end tax return process.
The quarterly updates themselves are summaries of the income and expenses held within the digital records. They are not four separate full Self Assessment tax returns. You still have an annual tax return.
For the first mandatory 2026/27 year, the standard quarterly deadlines are:
| Quarterly update | Deadline |
|---|---|
| First | 7 August 2026 |
| Second | 7 November 2026 |
| Third | 7 February 2027 |
| Fourth | 7 May 2027 |
| 2026/27 tax return | 31 January 2028 |
HMRC’s detailed guidance explains the update periods and also allows calendar-quarter arrangements in appropriate circumstances.
You are moving towards continuous digital bookkeeping, periodic reporting of that information, and then the annual tax return. For somebody whose records are already maintained properly in suitable software, adapting to Making Tax Digital for Income Tax may be a relatively modest change.
For somebody who currently hands an accountant a carrier bag, spreadsheet or years’ worth of bank statements every January, it is a much bigger one.
What If I Missed the 7 August 2026 Deadline?
Deal with a missed MTD quarterly update as soon as possible HMRC will not issue a penalty point for late quarterly updates during 2026/27, but the outstanding update still has to be filed before your tax return can go in.
This is particularly relevant now because the first deadline has already passed. If you should have been within MTD from April 2026 and did not submit the first quarterly update by 7 August, don’t ignore it simply because the date has gone.
There is, however, a useful bit of breathing room. HMRC has confirmed that it will not apply penalty points for late quarterly updates during the 2026/27 tax year. You still need to send the outstanding quarterly updates before you can submit the eventual tax return, and the normal obligations around the annual return and payment remain.
From later years the position becomes less forgiving. Under the points-based system, a missed quarterly deadline can produce a penalty point; reaching four points results in a £200 penalty, with further £200 penalties for subsequent missed obligations while at the threshold.
So, if August came and went and you have only just realised that you should have been using MTD, this is a problem to correct rather than a reason to panic.
Do Making Tax Digital for Income Tax Mean I Have to Do My Own Bookkeeping?
No, An authorised agent can maintain your digital records and make Making Tax Digital for Income Tax submissions on your behalf, provided you get them complete and timely information to work from.
This is another misconception worth killing off early. MTD requires the appropriate records to be maintained digitally and information to be submitted using compatible software. It does not require every landlord or sole trader to become their own bookkeeper.
An authorised agent can deal with MTD obligations on your behalf. HMRC specifically confirms that an agent can maintain compatible digital records and make submissions for a client. There is still a practical requirement on you to provide complete and timely information, of course. An accountant cannot digitally record an invoice you have never told them exists.
But the important question is not “Can I learn the software?” It is “What is the simplest reliable system for getting my records from the real world into the accounts?” That may involve bank feeds, digital receipt capture, bookkeeping software and an accountant doing some or most of the processing.
Our guide to What’s the Simplest Way to Stay on Top of Bookkeeping? explains the broader principle: the best bookkeeping system is usually the one that will actually be maintained.
Can I Still Use a Spreadsheet Under Making Tax Digital for Income Tax?
Potentially, but only if your overall system meets HMRC’s digital-record and digital-link requirements MTD is not a blanket ban on spreadsheets, but a standalone spreadsheet with no digital link to submission software usually will not qualify on its own.
HMRC requires digital records and, where more than one software product is used, the products need to be digitally linked appropriately. HMRC’s guidance says that if multiple products are involved, the record-keeping software and submission software must be digitally linked before quarterly updates or the tax return are submitted.
So, this is not really a debate about whether spreadsheets are good or bad. It is about whether your overall system satisfies the digital-record and digital-link requirements and can communicate properly with HMRC-compatible software.
For a straightforward sole trader, moving to a mainstream cloud bookkeeping system such as Xero, QuickBooks or FreeAgent may simply be easier than trying to engineer a workaround around an old spreadsheet. That does not mean software magically fixes bad bookkeeping. As we regularly point out at CCM, incorrect figures entered neatly into accounting software remain incorrect figures.
Are There Exemptions from Making Tax Digital for Income Tax?
Yes, there are circumstances in which a person may be automatically exempt or can apply to HMRC for an exemption. One important category is digital exclusion.
HMRC’s current guidance on MTD exemptions explains the circumstances in more detail, while its application guidance for an MTD exemption explains how an individual or authorised representative can apply.
An exemption is not simply available because somebody dislikes computers or would prefer to continue with paper records. HMRC considers the individual’s circumstances.
Where an exemption applies, the person does not have to use MTD for Income Tax but must continue reporting their income and gains through Self Assessment.
There are also particular rules and exceptions for certain types of taxpayers and income. If your affairs involve partnerships, trusts, non-UK residence or other less straightforward circumstances, it is worth checking the specific rules rather than assuming the headline threshold settles the question.
MTD exemptions exist, but they depend on the taxpayer’s circumstances; an exemption from MTD does not mean an exemption from Self Assessment.
A Practical Example: A Landlord Who Thinks Making Tax Digital for Income Tax Does Not Apply
Consider a landlord with three properties.
During 2024/25 the rents were:
| Property | Gross rent |
|---|---|
| Property 1 | £19,200 |
| Property 2 | £17,400 |
| Property 3 | £18,600 |
| Total gross property income | £55,200 |
After letting-agent fees, repairs, insurance and other relevant costs, suppose the rental profit is only £34,000. The landlord thinks: “I don’t make £50,000 from property, so MTD doesn’t apply.” That confuses profit with qualifying income.
Subject to the detailed rules applying to their circumstances, it is the £55,200 gross property income that matters for the threshold. That can bring the landlord within Making Tax Digital for Income Tax from 6 April 2026 even though the eventual taxable rental profit is considerably lower. This is particularly important for landlords because high property costs can create a very large gap between the rent collected and the money they actually regard as profit.
Our article on How Much Tax Should I Actually Be Setting Aside as a Landlord? looks at that wider distinction between rental profit, tax and cash flow.
What Is the Biggest Making Tax Digital for Income Tax Mistakes Sole Traders and Landlords Should Avoid?
The most common MTD mistakes are confusing profit with qualifying income, assuming a missed letter means you’re not affected, leaving bookkeeping until the quarterly deadline, ignoring digital-link requirements between spreadsheets and software, and forgetting that quarterly updates don’t remove the need for an annual tax return.
In practice, we see the same handful of errors again and again:
- Testing the wrong figure. Checking taxable profit instead of gross qualifying income is the single most common reason people wrongly assume MTD doesn’t apply to them.
- Waiting for a letter from HMRC. HMRC says it will write to taxpayers it identifies as being in scope, but not receiving a letter does not remove the obligation to check your own figures against the MTD thresholds.
- Leaving records until the deadline. Reconstructing three months of transactions in the days before a quarterly update defeats the point of Making Tax Digital for Income Tax and increases the risk of errors.
- Assuming a spreadsheet alone is compliant. Without a proper digital link to HMRC-recognised submission software, a spreadsheet on its own usually will not satisfy MTD requirements.
- Forgetting income sources add up. Treating self-employment and property income separately can hide the fact that, combined, they push you over a MTD threshold.
- Thinking quarterly updates replace the tax return. The annual Self Assessment return is still required alongside quarterly updates under MTD one does not substitute for the other.
- Registering late, or not at all. Some analyses of HMRC data suggest a meaningful proportion of the affected population had not registered by the time the first deadline arrived, which only makes catching up harder.
Avoiding these mistakes is largely a matter of checking the actual numbers early, rather than assuming your position based on how the business feels day to day.
Why Making Tax Digital for Income Tax Is Really a Bookkeeping Issue
Making Tax Digital for Income Tax is administratively heavier, but the businesses and landlords who struggle most with it are usually the ones whose bookkeeping was already behind the underlying problem is the records, not the reporting requirement itself.
There is a temptation to see all this as another HMRC filing nuisance. It certainly creates more administration, and I am not going to pretend otherwise.
If your bookkeeping is current, the bank is reconciled, invoices are recorded properly and expenses are captured as they happen, producing quarterly information for MTD should not require reconstructing three months of history every time a deadline arrives. If the books are six months behind, MTD exposes that weakness four times a year instead of once. That may be irritating, but the underlying problem isn’t the regime itself. It is the records.
There is also a potential upside. Current records make it much easier to understand profit, cash flow and the likely tax bill while there is still time to do something useful with that information.
See our guides on What Records Do I Actually Need to Keep? and How Often Should I Actually Look at My Numbers? for the practical side of keeping the accounting system useful rather than merely compliant.
How We Handle MTD at CCM
We start by establishing whether MTD applies and from when, based on your actual qualifying-income figures, then adjust your bookkeeping arrangements only as much as necessary.
For sole traders and landlords, we start with the bit that actually matters: establishing whether Making Tax Digital for Income Tax applies and from when. We look at the relevant Self Assessment figures, identify the qualifying income, check the bookkeeping arrangements and then decide what needs changing.
For some clients that means very little because their records are already digital and well maintained. For others, the sensible answer is to change the bookkeeping process rather than bolt another submission requirement onto a system that was already struggling.
The objective is not to turn clients into amateur accountants. It is to create a straightforward process in which records are kept properly, deadlines are met and the figures are useful enough to tell you something about the business or property portfolio.
What Should You Do Now?
There are really three groups. If your 2024/25 qualifying income was above £50,000 and you should already be within Making Tax Digital for Income Tax, check immediately that you are properly set up and that the first quarterly update has been dealt with. If it hasn’t, get the records up to date rather than allowing the problem to roll into the November deadline.
If your 2025/26 qualifying income was above £30,000, start preparing for April 2027. There is little benefit in waiting until next March to discover that your current bookkeeping system needs changing.
If your income is likely to bring you into the £20,000 group from April 2028, you have more time. A bookkeeping system that only works because you spend a miserable weekend sorting everything out once a year is probably worth fixing regardless of Making Tax Digital for Income Tax.
HMRC also allows eligible taxpayers to sign up voluntarily before they are required to join, although I would not automatically recommend volunteering simply for the sake of it. There should be a practical reason for doing so.
The Main Thing to Get Right
MTD is now real, but it does not apply to every person who completes a tax return. The quickest way to make this unnecessarily complicated is to start buying software before establishing whether you are actually caught.
Start with the numbers. What was your gross qualifying self-employment and property income? Which tax return determines your entry date? Are you above the relevant threshold? Is there an exemption or special rule that affects you?
Once those questions are answered, the practical part of MTD becomes much easier. For most clients, the best system will not be the cleverest one. It will be the one that keeps the records accurate with the least amount of unnecessary work.
Making Tax Digital Help From CCM
If you are a sole trader or landlord and are unsure whether Making Tax Digital applies to you, Carter Collins & Myer can carry out an MTD readiness review.
We can check your qualifying income and start date, review your current bookkeeping arrangements, identify whether your software is suitable and set out what needs to happen before your next reporting deadline.
For clients who would rather not deal with the submissions themselves, we can also discuss handling the accounting and Making Tax Digital for Income Tax process as part of the wider service.
About Rob Newman
Rob Newman is a partner at Carter Collins & Myer and has spent over 29 years in accountancy practice working with owner-managed businesses and individuals. His work focuses on practical tax, accounting, business and financial issues where the technically correct answer still has to work in the real world.
Carter Collins & Myer is an independent accountancy and tax advisory firm based in Rochdale, working with clients across Greater Manchester, Lancashire and Cheshire.
Sources and Further Reading
- HMRC – Find out if and when you need to use Making Tax Digital for Income Tax:
https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax - HMRC – Work out your qualifying income for Making Tax Digital for Income Tax:
https://www.gov.uk/guidance/work-out-your-qualifying-income-for-making-tax-digital-for-income-tax - HMRC – Use Making Tax Digital for Income Tax:
https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide - HMRC – Create digital records:
https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/create-digital-records - HMRC – Send quarterly updates:
https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/send-quarterly-updates - HMRC – Choose the right software for Making Tax Digital for Income Tax:
https://www.gov.uk/guidance/choose-the-right-software-for-making-tax-digital-for-income-tax - HMRC – Penalties for Making Tax Digital for Income Tax:
https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax - HMRC – Find out if you can get an exemption:
https://www.gov.uk/guidance/find-out-if-you-can-get-an-exemption-from-making-tax-digital-for-income-tax - HMRC – Apply for an exemption:
https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax - HMRC – Sign up for Making Tax Digital for Income Tax:
https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-income-tax
Disclaimer
This article provides general information based on HMRC guidance available in September 2026. Making Tax Digital obligations depend on the taxpayer’s income sources, qualifying income, circumstances and any applicable exemptions. The article should not be treated as individual tax advice.