Making Tax Digital for Income Tax (MTD for Income Tax) changes how sole traders and landlords report income to HMRC. Instead of filing one annual Self Assessment return, you’ll send quarterly digital updates through compatible software, then finish with a final declaration at the end of the tax year.
The rules started in April 2026 for people with qualifying income above £50,000. If they do not apply to you yet, the threshold drops again from April 2027.
Disclaimer: This article is for general information only. Tax rules change, so check HMRC’s current guidance or speak to a qualified accountant before you decide what to do.
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 goes above £50,000 a year. From April 2027, the threshold drops to £30,000. If your combined self-employment and rental income stays below those levels, you remain on Self Assessment for now.
‘Total qualifying income’ means the gross income from self-employment and property rental combined. It does not mean profit after expenses.
For example, if you earn £35,000 from freelance work and £20,000 from a rental property, your combined qualifying income is £55,000. You should have signed up by April 2026.
Company directors who take a salary and dividends from their limited company are not affected by MTD for Income Tax. It applies to sole traders and landlords only.
What do you need to do under MTD for Income Tax?
Under MTD for Income Tax, you need HMRC-compatible software to keep digital records of income and expenses during the year, send four quarterly updates to HMRC from 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 gives HMRC a summary of income and expenses for that period. It does not trigger an immediate tax payment. Tax is still calculated and paid by 31 January after the tax year ends.
What software is compatible with MTD for Income Tax?
HMRC keeps a list of approved 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 free tiers.
Common options include Xero, QuickBooks, FreeAgent, and a range of specialist apps for landlords. Your accountant may already use one of them and can add you as a client.
The main requirement is simple: the software must connect directly to HMRC’s API and submit quarterly updates. Spreadsheets on their own do not qualify unless you use bridging software that links them to HMRC.
What if you miss the MTD deadline?
If you were meant to sign up by April 2026 and have not done so, you are already out of compliance. HMRC is phasing in penalties for late quarterly updates. The failure-to-notify process applies, so HMRC can charge penalties based on the potential lost revenue from unreported income.
If you missed the start date, speak to an accountant as soon as you can. Voluntary compliance before HMRC contacts you usually leads to lower penalties than waiting.
Does MTD for Income Tax replace Self Assessment completely?
Not quite. You still submit a final declaration at the end of the tax year. It replaces the old SA return, but it covers the same ground: your total income, allowances, and any other sources not covered by MTD.
Other income sources, such as employment income through PAYE, dividends, or capital gains, still go into the final declaration alongside the MTD quarterly data.
HMRC wants most of the data in place before you submit the final declaration. In practice, that should make the process at the end of the tax year 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 have not signed up yet, act now. Choose MTD-compatible software. Keep digital records from 6 April 2026 onwards. Send your first quarterly update if the deadline has already passed.
If your qualifying income sits between £30,000 and £50,000, you have until April 2027. Use that time to choose software and move your records into a digital format.
Working with small business accountants in the UK who know MTD means the quarterly submissions happen without you having 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 send quarterly updates on your behalf.
Get a quote and we’ll send you our current pricing, DASA Accountancy.