Making Tax Digital for Income Tax / Lesson 3 of 7
When MTD reaches you
It is being phased in by income level. Being outside it today does not mean being outside it next year.
The short answer
- ✓ MTD phases in by qualifying income, with the threshold stepping down over time
- ✓ You can be brought into scope without your income changing
- ✓ Digital records are required from the start of the mandated tax year, not from sign-up
- ✓ Exemptions exist but must be applied for, not assumed
Phased by income, not all at once
MTD for Income Tax is being introduced in stages. The highest qualifying incomes came first, and the threshold steps down over subsequent years, pulling in progressively smaller businesses and landlords.
The consequence people miss: you can be brought into MTD without your income changing at all. If you sit below the current threshold, a later phase may still capture you when the bar drops.
Checking your position
The timetable and the threshold figures have been revised more than once by government, so this lesson deliberately does not print a date you might rely on months from now. Check the current stage in two places:
- The GOV.UK guidance linked at the foot of this lesson, which is authoritative
- Our Making Tax Digital hub, which tracks the current phase
The calculator below takes your qualifying income and tells you which phase you fall into.
What happens when you are in scope
1. HMRC identifies you from a filed return
2. You choose compatible software
3. You sign up for MTD for Income Tax
4. You keep digital records from the start of the tax year
5. Four quarterly updates during the year
6. One final declaration after the year endsNote step 4. The obligation runs from the start of the tax year in which you are mandated, not from the day you sign up. Signing up in month five with no digital records for months one to four leaves you reconstructing exactly the way MTD was designed to stop.
Signing up early
You can join voluntarily before you are mandated. There is a genuine argument for it: you learn the rhythm in a year where mistakes carry less weight, and you find out what your software does badly while it still does not matter much.
The argument against is equally genuine: you take on four submissions a year sooner than you had to. This is a real choice rather than an obvious one.
Exemptions
Exemption is possible where it is not reasonably practicable for you to use digital tools, for example because of age, disability, location or religious grounds. It is not granted for finding it inconvenient or preferring paper, and it must be applied for rather than assumed.
Common mistakes
- Assuming you are permanently out of scope. The threshold steps down.
- Signing up but not backdating records to the start of the tax year. The obligation covers the whole year.
- Relying on a threshold figure you read once. Check GOV.UK, the timetable has changed before.
- Assuming exemption is automatic. It has to be applied for and justified.
Try it on your own numbers
This is the same calculator as the full tool page, using 2026/27 rates.
Check if Making Tax Digital applies to you
MTD for Income Tax is based on your gross (pre-expenses) income from self-employment and property - combined. Enter your figures below.
"Gross" means total income before deducting any expenses. Don't include employment (PAYE) salary, dividends, savings interest or pensions - MTD for Income Tax counts only self-employment and property income.
Where you sit on the MTD timeline
What you'll need to do
- Keep digital records of your income and expenses.
- Send a quarterly update to HMRC (4 per year) using compatible software.
- Submit a final declaration after the tax year end (replacing the old Self Assessment return).
Key takeaways
- ✓ MTD phases in by qualifying income, with the threshold stepping down over time
- ✓ You can be brought into scope without your income changing
- ✓ Digital records are required from the start of the mandated tax year, not from sign-up
- ✓ Exemptions exist but must be applied for, not assumed
Check you have got it
3 quick questions. No score is kept, and you can change your mind.
1. You are below the current MTD threshold. Are you permanently outside MTD?
2. You are mandated from the start of a tax year but only sign up five months in. What must your digital records cover?
3. Who can get an exemption from MTD?
Sources
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