Making Tax Digital for Income Tax (MTD for Income Tax) changes the way sole traders and landlords report income to HMRC. Instead of filing one annual Self Assessment return, you’ll send quarterly digital updates using compatible software, then complete a final declaration at the end of the tax year. HMRC’s MTD for Income Tax guidance has the current requirements and sign-up process.
The rules came in from April 2026 for those with qualifying income above £50,000. If you’re not yet affected, the threshold drops further from April 2027.
Disclaimer: This article is for general information only. Tax rules change. Check HMRC’s current guidance or speak to a qualified accountant before making decisions about your reporting obligations.
Who does MTD for Income Tax apply to?
MTD for Income Tax is mandatory from April 2026 for self-employed sole traders and landlords whose total qualifying income exceeds £50,000 a year. From April 2027, the threshold drops to £30,000. If your combined self-employment and rental income is below these thresholds, you stay on Self Assessment for now.
‘Total qualifying income’ means the combined gross income from self-employment and property rental, not the profit after expenses.
So if you earn £35,000 from freelance work and £20,000 from a rental property, your combined qualifying income is £55,000. You were required to sign up by April 2026.
Company directors who draw a salary and dividends from their limited company are NOT affected by MTD for Income Tax. MTD for Income Tax applies to sole traders and landlords only. If you’re unsure whether you’re required to file a Self Assessment return at all, read our guide on who needs to file Self Assessment.
What do you need to do under MTD for Income Tax?
Under MTD for Income Tax, you must use HMRC-compatible software to keep digital records of your income and expenses throughout the year, send four quarterly updates to HMRC summarising those records, and submit a final declaration to confirm your total income. You can no longer file a standard paper or online Self Assessment return.
The quarterly deadlines are:
- 5 August (for 6 April to 5 July)
- 5 November (for 6 July to 5 October)
- 5 February (for 6 October to 5 January)
- 5 May (for 6 January to 5 April)
Each quarterly update is a summary of income and expenses for that period. It doesn’t trigger an immediate tax payment, tax is still calculated and paid by 31 January following the end of the tax year.
What software is compatible with MTD for Income Tax?
HMRC maintains a list of approved MTD software that works with MTD for Income Tax. You can use a full accounting package, a dedicated MTD app, or bridging software. HMRC does not provide free software for income tax, but some providers offer basic tiers at no cost.
Commonly used options include Xero, QuickBooks, FreeAgent, and several specialist apps aimed at landlords. Your accountant may already use one of these and can add you as a client.
The key requirement: the software must connect directly to HMRC’s API and be able to submit quarterly updates. Spreadsheets alone don’t qualify unless you use bridging software that links to HMRC.
What if you miss the MTD deadline?
If you were required to sign up by April 2026 and haven’t, you’re already out of compliance. HMRC is phasing in penalties for late quarterly updates. The failure-to-notify process applies: HMRC can charge penalties based on the potential lost revenue from unreported income.
If you’ve missed the start date, speak to an accountant as soon as possible. Voluntary compliance before HMRC contacts you leads to lower penalties than waiting to be asked.
Does MTD for Income Tax replace Self Assessment completely?
Not entirely. You still submit a final declaration at the end of the tax year. This replaces the old SA return but covers the same ground, your total income, allowances, and any other sources not covered by MTD.
Other income sources, such as employment income via PAYE, dividends, or capital gains, are still included in the final declaration alongside the MTD quarterly data.
HMRC’s aim is that by the time you submit the final declaration, most of the data is already in the system from your four quarterly updates. In practice, the year-end process should be quicker than the old annual return.
What should you do now if you’re affected?
If your qualifying income is above £50,000 and you haven’t signed up yet, act immediately. Choose MTD-compatible software. Keep digital records from 6 April 2026 onwards. Submit your first quarterly update if the deadline has already passed.
If your qualifying income is between £30,000 and £50,000, you have until April 2027. Use this time to choose software and move your record-keeping to a digital format.
Working with small business accountants in the UK who understand MTD means the quarterly submissions happen without you needing to think about them.
DASA can help you comply
We set up and manage MTD for Income Tax for sole traders and landlords. We handle software setup, connect to HMRC, and submit quarterly updates on your behalf.
Get a quote and we’ll send you our current pricing, DASA Accountancy.