Money Matters

6 things you need to know about Making Tax Digital for Income Tax

Whether you’re new to Making Tax Digital or preparing for the changes, this guide covers the essentials to help you understand and stay compliant.

Published 31 July, 20269 min read Share

Making Tax Digital (MTD) for Income Tax is HMRC’s move to make eligible sole traders and landlords keep digital records and submit Income Tax updates using compatible software. 

It starts in phases from 6 April 2026, depending on your qualifying income from self-employment and property. 

In practical terms, MTD for Income Tax means using software to keep records for your sole trader or property income, sending updates to HMRC during the tax year, and submitting a digital tax return by 31 January after the tax year ends. 

Key takeaways 

• MTD for Income Tax affects eligible sole traders and landlords who are registered for Self Assessment and have qualifying income above the relevant threshold. 

• Qualifying income means total income from self-employment and property before expenses. Employment income, dividends, pensions, and partnership share of profit are not counted for this threshold. 

• The first phase applies from 6 April 2026 for qualifying income over £50,000. Further phases apply from 6 April 2027 for over £30,000, and from 6 April 2028 for over £20,000. 

• You will need to use MTD-compatible software to keep digital records and send regular updates to HMRC. 

• Some people will continue using Self Assessment because they are below the threshold, outside the affected income types, or exempt. 

Here’s what we cover:

1. Who does Making Tax Digital for Income Tax affect?

MTD for Income Tax affects eligible sole traders and landlords who currently use the Self Assessment income tax system. 

It applies in phases based on your qualifying income from self-employment and property. 

Qualifying income	MTD start date	What this means
Over £50,000	6 April 2026	You should have started following the MTD for Income Tax rules.
Over £30,000	6 April 2027	You will need to follow the rules from this date if you are in scope.
Over £20,000	6 April 2028	You will need to follow the rules from this date if you are in scope.

Qualifying income is your total income from self-employment and property before expenses.  

It is not your profit after allowable expenses.  

If you have more than one sole trader business, rental income, or both, those relevant income sources are added together when working out whether you are above the threshold. 

If MTD for Income Tax applies to you, you must use MTD-compatible software to record income and expenditure relating to your sole trade or landlord income.  

You will also need to submit regular updates to HMRC through compatible software, and submit a digital tax return by 31 January following the end of the tax year. 

2. How can MTD for Income Tax make accounting easier? 

The requirements for MTD for Income Tax can sound like extra admin.  

But if you use the right accounting software and keep your records up to date, much of the process can become part of your normal accounting routine. 

Accounting software can help you record income and expenses, prepare information for regular updates, and keep a clearer view of your cash flow and tax position throughout the year. 

If your business is not already using accounting software, MTD for Income Tax may be the point where you move away from manual records.  

That can make day-to-day tasks easier, such as creating invoices, tracking overdue payments, and keeping your financial records in one place. 

For businesses already using accounting software, MTD for Income Tax can help you stay closer to your numbers.  

If your records are accurate, regular updates may make it easier to understand what you might owe and plan ahead with more confidence.

What this means for your business

MTD for Income Tax is a compliance change, but it can also be a chance to improve how you manage records, tax admin, and cash flow. The main benefit comes from keeping accurate digital records throughout the year, rather than trying to pull everything together close to the deadline. 

3. Will you still need to submit a Self Assessment tax return? 

When Making Tax Digital was first announced in 2015, the chancellor described it as “the death of the annual tax return”.  

For many people using MTD for Income Tax, reporting income tax will no longer mean submitting a Self Assessment tax return in the same way as before. 

Instead, you will send regular updates during the tax year and submit a digital tax return by 31 January each year.  

Some people may still need to submit information outside MTD if they have accounting data that cannot be submitted digitally. 

If your turnover is below the MTD for Income Tax thresholds, you should continue submitting a Self Assessment return for your sole trader or landlord income unless HMRC tells you otherwise. 

If you were in the first MTD phase from 6 April 2026, you may still need to submit a final Self Assessment tax return by 31 January 2027 for the 2025/26 tax year. 

That’s because 2025/26 was the final tax year before the first MTD for Income Tax start date. 

There are reasons why Self Assessment is ending for many sole traders as MTD for Income Tax takes effect.

4. When does MTD for Income Tax start? 

MTD for Income Tax started on 6 April 2026 for the first group of eligible taxpayers.  

Your start date depends on your qualifying income. 

• If your qualifying income is over £50,000, you should have started following the rules from 6 April 2026. 

• If your qualifying income is over £30,000, you will need to follow the rules from 6 April 2027. 

• If your qualifying income is over £20,000, you will need to follow the rules from 6 April 2028. 

For these thresholds, qualifying income means income before expenses from self-employment and property.  

This is different from taxable profit, which is calculated after allowable expenses. 

There are 5 reasons to start Making Tax Digital for Income Tax early rather than waiting until your deadline. 

5. How do you check whether MTD for Income Tax applies to you? 

To check whether MTD for Income Tax applies, start with the income sources that count. 

This includes sole trader income, property income, or both. It does not include every type of personal income. 

If you have received a letter from HMRC, you may want to understand why HMRC has written to you about Making Tax Digital for Income Tax.

Quick check

• Add together your total self-employment income before expenses.
• Add your total property income before expenses, if you are a landlord. 
• Exclude income that does not count for MTD qualifying income, such as employment income, dividends, pensions, and partnership share of profit. 
• Compare the total with the relevant threshold for the correct tax year. 
• Check HMRC guidance or speak to an accountant if your circumstances are complex. 

This income tax is based on the sole trader businesses you run and any rental income that falls within scope.  

The goal is to work out and pay your personal tax bill, plus any National Insurance contributions that apply. 

MTD for Income Tax also means you need to provide separate updates for each sole trader business and for your rental income.  

For example, if you run two sole trader businesses and receive rental income, you may need to send updates for each business and for the rental income, as well as submit a digital tax return by 31 January. 

You can use an MTD for Income Tax operational checklist to help you prepare.

6. Who does not need to use MTD for Income Tax?

Not everyone who uses Self Assessment needs to use MTD for Income Tax.  

The following list is non-comprehensive, but it explains common groups that are outside the first phases or may not need to follow MTD for Income Tax rules. 

• People whose qualifying income from sole trader or property income is below the relevant threshold for their start date. 
• People whose income does not come from sole trader or property rental income. 
• Limited Liability Partnerships (LLPs). 
• Partnerships that include an incorporated company as a member. 
• Trusts and estates. 
• Trustees of non-registered pension schemes. 
• Non-resident companies. 
• People HMRC agrees are digitally excluded, for example because of location, disability, or religious reasons. 

If HMRC agrees you are digitally excluded, you will not have to use MTD for Income Tax.  

However, HMRC is strict about exemptions.  

For example, if you cannot get online at home but can reasonably use an accountant, another location, or other available facilities, you may still be expected to meet the requirements. 

Final thoughts on MTD for Income Tax

Getting your head around MTD for Income Tax is something to start sooner rather than later.  

Even if your start date is not immediate, understanding the rules makes it easier to check whether you are affected, choose compatible software, and build good digital record-keeping habits. 

MTD for Income Tax is intended to simplify how eligible people keep records and report income tax.  

Once you understand the basics and have the right software in place, it can give you a clearer view of your finances and reduce the pressure of tax admin at the end of the year. 

Frequently asked questions on MTD for Income Tax

Editor’s note: This article was first published in September 2021 and has been updated for relevance.

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