Making Tax Digital for Income Tax 2026

MTD for Income Tax - mandatory from 6 April 2026 for sole traders and landlords with qualifying income over £50,000. What changes, software, quarterly updates.

From 6 April 2026, sole traders and landlords with qualifying income above £50,000 must switch from the annual paper-or-online Self Assessment process to HMRC’s new Making Tax Digital for Income Tax (MTD ITSA) system. Instead of a single return each January, you submit quarterly updates through compatible software — four submissions per tax year plus a final declaration. This guide covers who’s in scope, when, and what you actually need to do.

The headline: MTD becomes mandatory 6 April 2026

From the start of the 2026/27 tax year, MTD ITSA applies if you are:

  • Registered for Self Assessment, AND
  • Earn from self-employment or property (or both), AND
  • Have qualifying income of more than £50,000 (based on the most recently submitted Self Assessment return — 2024/25 for the April 2026 kick-off)

If you meet all three criteria, HMRC writes to you in early 2026 telling you that you need to sign up. By 6 April 2026 you must be using MTD-compatible software for digital record-keeping and quarterly updates.

What counts as “qualifying income”

HMRC defines qualifying income as the combined gross income (before expenses) from:

  • Self-employment (all trades combined — not net profit, gross turnover)
  • UK rental property
  • Overseas property (reported on UK self-assessment)

It does NOT include:

  • PAYE salary
  • Pension income
  • Dividends, savings interest
  • Capital gains

Example: you’re a part-time contractor earning £40,000 gross from your business and renting out a flat for £15,000/year. Total qualifying income = £55,000 → you’re in MTD from April 2026 even though your net profit is much lower.

The 2026 → 2027 → 2028 phasing

HMRC’s published roadmap:

  • 6 April 2026 — mandatory for qualifying income > £50,000
  • 6 April 2027 — mandatory extends to qualifying income > £30,000 (subject to HMRC review)
  • 6 April 2028 — further extension planned, thresholds TBC

Below the current threshold you can voluntarily sign up from April 2026 — but most HMRC advisers suggest waiting unless you already have clean digital records and want to test the system early.

Partnerships: MTD ITSA for partnerships was delayed to a date “no earlier than April 2027”. Not included in the April 2026 mandatory phase.

What changes for you day-to-day

Before MTD (annual Self Assessment)

  1. Keep records however you like (spreadsheet / paper / shoebox)
  2. Once a year, calculate total income and expenses
  3. File a single tax return by 31 January after the tax year
  4. Pay by the same deadline

Under MTD ITSA

  1. Keep digital records of income and expenses in MTD-compatible software. HMRC doesn’t accept paper or general-purpose spreadsheets unless “bridging software” is used.
  2. Submit quarterly updates summarising each three-month period to HMRC through the software
  3. Submit a final declaration after year-end to confirm totals, adjust for any year-end items (capital allowances, allowances, personal savings / dividend etc.)
  4. Pay by 31 January as before

The four MTD quarterly deadlines (for 2026/27 tax year)

Each update is due one month after the quarter ends:

QuarterPeriod coveredDeadline
Q16 April – 5 July 20265 August 2026
Q26 April – 5 October 20265 November 2026
Q36 April – 5 January 20275 February 2027
Q46 April 2026 – 5 April 20275 May 2027

Note: quarters are cumulative (covering 6 April to the quarter-end each time), not discrete 3-month windows.

Final declaration: by 31 January 2028 — same as the old Self Assessment deadline, confirming total liability and settling the bill.

MTD-compatible software

HMRC lists approved products at gov.uk — find MTD-compatible software. Common options:

  • FreeAgent — free for NatWest / RBS / Mettle business-account customers
  • QuickBooks Self-Employed / Online
  • Xero — integrates with many payment processors
  • Sage Accounting
  • Coconut — sole-trader focused
  • Crunch — combines software + accountant access

Costs typically £10-£25/month for a basic sole-trader tier, more for added payroll / inventory features.

Bridging software: if you already run clean spreadsheets, you can pair them with bridging tools (e.g. VitalTax, 123 Sheets) that submit the data to HMRC via the MTD API. Cheapest route if you’re comfortable with spreadsheets.

Free option: HMRC hasn’t released a government-provided MTD submission tool. Third-party software is required.

Digital links — the detail that trips people up

HMRC requires “digital links” between your record-keeping and the submission software. Translation: you can’t manually retype numbers from a spreadsheet into MTD software. Data must flow via:

  • CSV / Excel import
  • Direct integration (bank feeds, API)
  • Linked cells between sheets with bridging software

Copy-pasting from one file to another is allowed between digital sources but not as the ONLY link. HMRC can audit and fine for non-compliance.

Exemptions

You can apply for an MTD exemption if:

  • Your religion’s practice prevents electronic record-keeping
  • You have a genuine disability that makes digital use impossible
  • Your location has no reliable internet

Apply via HMRC. Approvals are case-by-case and not automatic. “I prefer paper” is not a valid ground.

Penalties under MTD (new regime)

MTD introduces a points-based late-filing system:

  • Each missed quarterly update = 1 point
  • 4 points within 24 months (sole trader) = £200 penalty
  • Each additional late update after the threshold = another £200
  • Points expire after 24 months of compliance

For late payments:

  • 15 days late → 2% of unpaid tax
  • 30 days late → another 2%
  • 31+ days late → 4% per annum daily interest, calculated daily

The new penalty system runs alongside the existing Self Assessment penalties for anyone not yet in MTD.

Getting ready — 3-month prep plan

If you’re in scope for April 2026 and reading this in April/May 2026, you’re already late — but not terminal. Recommended sequence:

  1. Week 1-2: pick software. Most sole traders: FreeAgent (free with NatWest/RBS/Mettle) or QuickBooks Self-Employed.
  2. Week 3-4: import 2024/25 + 2025/26 transactions as historical context. Set up bank feeds.
  3. Week 5-8: sign up for MTD ITSA on gov.uk — you’ll need your Self Assessment UTR and Government Gateway credentials.
  4. Week 9-12: run a dummy Q1 submission in early August 2026 to test the flow before the real deadline.

Tax calculation hasn’t changed — just the process

The underlying Income Tax and NI calculations for 2026/27 are unchanged:

  • 20% / 40% / 45% bands (English & Welsh rates)
  • Class 2 NI £3.65/week, Class 4 at 6% / 2%
  • Personal Allowance £12,570, trading allowance £1,000, property allowance £1,000

Use the self-employed calculator to model your 2026/27 liability — MTD changes WHEN you pay and HOW you file, not HOW MUCH.