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Written By Amy Smith
Making Tax Digital for Income Tax: Who Must Comply?
Making Tax Digital for Income Tax is now in effect for certain self-employed individuals and landlords. However, not everyone needs to follow the new rules just yet.
The first group started using the system in April 2026, with further changes scheduled for April 2027 and April 2028.
If you are self-employed, receive rental income or have more than one source of income, it is important to understand when the requirements apply to you.
This guide explains who must comply, how qualifying income is calculated, the reporting deadlines and what you need to do next.
Making Tax Digital (MTD) for Income Tax is HMRC’s system for managing tax records and reporting information digitally.
Instead of relying solely on an annual Self Assessment tax return, qualifying individuals must use compatible software to maintain digital records of their self-employment or property income and expenses.
They must also send quarterly updates to HMRC and complete an annual tax return using compatible software.
The aim is to improve record keeping and give taxpayers a clearer picture of their financial position throughout the year.
Making Tax Digital for Income Tax is being introduced gradually, based on qualifying income.
| Start date | Qualifying income | Tax return used to assess income |
|---|---|---|
| 6 April 2026 | Over £50,000 | 2024/25 |
| 6 April 2027 | Over £30,000 | 2025/26 |
| 6 April 2028 | Over £20,000 | 2026/27 |
These thresholds apply to qualifying gross income from self-employment and property combined, before expenses are deducted.
The requirements generally apply to sole traders and landlords registered for Self Assessment who exceed the relevant threshold and are not exempt.
If your qualifying income exceeded £50,000 in the 2024/25 tax year, you should already be following the Making Tax Digital requirements for 2026/27, unless an exemption applies.
If your qualifying income exceeded £30,000 in 2025/26, you will generally need to comply from 6 April 2027.
The next stage will bring in qualifying individuals whose income exceeded £20,000 in 2026/27.
You can check your position using HMRC’s Making Tax Digital eligibility guidance.
One of the most common misunderstandings is that the thresholds are based on profit.
They are not.
For Making Tax Digital, qualifying income generally means your total gross income from self-employment and property, before business expenses or tax are deducted.
For example, consider someone receiving:
£27,000 in annual self-employment income
£25,000 in annual rental income
Their combined qualifying income would be £52,000.
If these figures were reported in the relevant 2024/25 tax return, they would generally have been required to join Making Tax Digital from April 2026, assuming no exemption applied.
Income from employment through PAYE, pensions and dividends does not normally count towards the qualifying income threshold.
This distinction is particularly important for people who receive income from several different sources.
Once you are required to use Making Tax Digital for Income Tax, you must send quarterly summaries of your income and expenses to HMRC through compatible software.
For the first group, which started in April 2026, the deadlines are:
| Quarterly update | Deadline |
|---|---|
| First update | 7 August 2026 |
| Second update | 7 November 2026 |
| Third update | 7 February 2027 |
| Fourth update | 7 May 2027 |
These updates are summaries of financial records, not separate tax returns. Each update is cumulative, covering everything from 6 April to the end of that quarter. The standard deadlines continue each year for taxpayers who remain within Making Tax Digital.
You must also complete your annual Income Tax return.
For those who joined in April 2026, the deadline for the 2026/27 tax return is 31 January 2028.
The usual Self Assessment deadline of 31 January 2027 still applies to their 2025/26 tax return.
Yes. If you are required to use Making Tax Digital for Income Tax, you need compatible software that can manage your digital records and communicate with HMRC.
The software must support the relevant record-keeping and submission requirements.
You may already use an accounting system that can support Making Tax Digital. However, you should confirm its compatibility rather than assuming your existing software meets the requirements.
If you currently use spreadsheets, you may be able to continue using them alongside suitable bridging software.
HMRC provides a guide to choosing compatible Making Tax Digital software.
You can also read about our bookkeeping services if you need help maintaining accurate financial records.
Making Tax Digital introduces a points-based late submission penalty system, but special arrangements apply during the first year.
For the 2026/27 tax year, HMRC will not apply late submission penalty points for missing quarterly update deadlines.
However, taxpayers must still complete their quarterly updates before they can submit their annual tax return through the system.
Late annual tax returns and late tax payments can still result in penalties.
From subsequent tax years, late quarterly updates may also attract penalty points. Reaching the relevant threshold can result in a £200 penalty, with further penalties for additional missed deadlines.
For the latest details, read HMRC’s Making Tax Digital penalty guidance.
Some individuals may qualify for an exemption.
For example, exemptions may apply where someone is digitally excluded and cannot reasonably use digital tools because of their circumstances.
Some exemptions apply automatically, while others require an application to HMRC.
Being unfamiliar with accounting software does not automatically mean you are exempt.
If you believe an exemption may apply, check HMRC’s official exemption guidance before taking action.
If you are already required to comply, or expect to join the system in April 2027 or April 2028, there are several sensible steps to take.
First, review your qualifying income for the relevant tax year. Remember to include both self-employment and property income where applicable.
Next, check that your current accounting software can meet the Making Tax Digital requirements.
You should also review how you record your income and expenses. Keeping records organised throughout the year will make quarterly reporting easier to manage.
Finally, make sure you have signed up for Making Tax Digital. HMRC writes to people whose income is above the threshold, but if you have not received a letter it is still your responsibility to check and sign up.
If you are unsure where to begin, an accountant can help review your circumstances and explain the requirements.
Making Tax Digital has changed how qualifying sole traders and landlords manage their Income Tax reporting.
Whether you are already using the system or preparing for the 2027 or 2028 rollout, understanding your responsibilities now can help you avoid unnecessary complications later.
At Findlay Todd, we provide dedicated support with software setup, digital record keeping, quarterly reporting and annual tax requirements.
To find out what assistance is available, visit our Making Tax Digital for Income Tax accounting service.