Making Tax Digital for Income Tax: The Complete 2026 Guide

Making Tax Digital (MTD) for Income Tax is the government's plan to move tax reporting online - and for hundreds of thousands of self-employed people and landlords it replaces the once-a-year tax return with digital records and quarterly updates. This guide explains who has to comply, when, and what it means in practice, without the jargon.

What is Making Tax Digital for Income Tax?

In short: MTD for Income Tax (sometimes called MTD ITSA) requires affected sole traders and landlords to keep digital records of income and expenses, send HMRC a summary every quarter, and submit a final declaration after the tax year instead of the traditional Self Assessment return.

It doesn't change how much tax you pay - the rules for working out your bill stay the same. What changes is how, and how often, you report. Not sure whether it applies to you? Our free MTD Scope Checker gives you the answer in seconds.

Worked example: when MTD applies

Priya rents out one flat for £14,000 a year and freelances as a designer earning £6,000. Her profit after costs is modest, but Making Tax Digital looks at gross income - £20,000 combined - so she is over the threshold and must keep digital records and file quarterly updates, even though her tax bill is small.

Making Tax Digital for Income Tax - phase-in by gross income

Who has to use MTD for Income Tax?

In short: it's based on your combined gross income from self-employment and property, phased in by income level: over £50,000 from April 2026, over £30,000 from April 2027, and over £20,000 from April 2028.

The key word is gross - it's your turnover (total sales or rent) before expenses, not your profit. A landlord with £40,000 of rent and a big mortgage is measured on the £40,000. Employment salary, dividends, pensions and savings interest do not count towards the threshold. So a salaried employee with a small side business is judged only on the side-business income.

When does MTD for Income Tax start?

In short: the first phase began on 6 April 2026 for those with qualifying income over £50,000. The £30,000 threshold follows in April 2027 and £20,000 in April 2028.

If you're in a later wave, it's still worth preparing early - the businesses that find MTD painless are the ones with tidy digital records before they're mandated.

What will I have to do?

Once you're in scope, there are three obligations:

• Keep digital records of your business or property income and expenses.
• Send quarterly updates - four short summaries a year, through compatible software. The standard quarters run from 6 April.
• Submit a final declaration after the tax year ends, which replaces your Self Assessment return and confirms your final position.

The quarterly updates are summaries, not full returns - you don't finalise reliefs four times a year. You can keep the records for free with our MTD Quarterly Record Organiser, which tags each entry to the right quarter and builds your four summaries automatically, then exports a CSV for your software or accountant.

What records and software do I need?

In short: you need digital records and HMRC-recognised software to file the updates. Many landlords and sole traders can keep their records for free and use a low-cost "bridging" tool, or let their accountant file from a spreadsheet.

Most full bookkeeping packages charge a subscription, but you don't necessarily need one - the heavy lifting is the record-keeping, which our free organiser handles. HMRC publishes a list of compatible software, and your accountant can often file on your behalf. The important thing is that your records are digital and complete.

How should I prepare?

Start now, even if you're in a later wave. Keep income and expenses digitally from the start of the tax year, separate business and personal spending, and get comfortable with quarterly summaries before they count. If you're a landlord, our Landlord Rental Income & Tax Organiser handles the Section 24 mortgage-interest rules alongside your records. To estimate the tax itself, use the Self-Employed Tax Calculator, and check whether you'll owe payments on account.

For the official rules, HMRC's MTD for Income Tax guidance is the definitive source. Use it for the detail, and our free tools for the day-to-day record-keeping that keeps you compliant. You may also find our Self Assessment deadlines guide helpful while the two systems overlap.

The bottom line

MTD for Income Tax is a big change, but it rewards preparation. Check whether you're in scope, start keeping digital records, and the quarterly deadlines become routine rather than stressful. Begin with the free Scope Checker and Quarterly Record Organiser - together they cover the two things every affected taxpayer needs.

MTD for landlords: what's different

In short: landlords are firmly in scope for MTD for Income Tax, and the threshold is based on gross rent, not profit - so even a heavily mortgaged portfolio can be caught.

This trips up a lot of landlords. Because mortgage interest is no longer deducted from rental profit under Section 24 (you get a 20% tax credit instead), a landlord can have substantial gross rent but modest profit - yet it's the gross rent that counts towards the £50,000, £30,000 and £20,000 thresholds. If you let property, our Landlord Rental Income & Tax Organiser keeps your records and applies the Section 24 rules, and our Self Assessment guide covers the system MTD is replacing.

How MTD differs from the current Self Assessment system

Today, most self-employed people and landlords file one Self Assessment return a year, often in a rush before the 31 January deadline. Under MTD, that single return is replaced by four quarterly updates plus a final declaration, all filed digitally through software. The upside is that you keep records as you go rather than reconstructing a year of receipts in January; the change is the rhythm and the requirement for digital tools. The tax you owe, and when you pay it, is unchanged - payments on account and the January balancing payment still apply.

Will MTD change how much tax I pay?

In short: no. MTD changes how you report and how often, not the amount of tax. Your allowances, rates, reliefs and deadlines for paying are the same.

It's purely an administrative change. That said, better record-keeping often means people claim more of the expenses they're entitled to, which can reduce the tax bill simply by not missing legitimate deductions.

Common MTD questions

Do I need an accountant for MTD? No, but you do need compatible software or a way to file the quarterly updates. Many people keep their own records and either use a low-cost filing tool or have an accountant submit on their behalf.

What if I have more than one business or property? You combine the income from all your self-employment and property to test the threshold, and you'll report each source through MTD once you're in scope.

Is there a penalty for missing a quarterly update? Yes - MTD uses a points-based penalty system for late submissions, separate from penalties for paying tax late. Staying on top of your records is the best way to avoid points.

Can I start before I'm required to? Yes, and it's a good idea. Keeping digital records voluntarily means you'll be ready when your threshold date arrives. Our free Quarterly Record Organiser lets you start today.

What will it cost?

In short: the record-keeping can be free; the cost is the filing software, which ranges from low-cost bridging tools to full bookkeeping subscriptions.

You don't have to buy an expensive package. Because the demanding part is keeping accurate, categorised, quarter-split records - which our free organiser does - even a cheap bridging tool that simply submits your figures is enough. If you already work with an accountant, ask how they'd like to receive the data; many will file from a spreadsheet or CSV. The goal is digital records and timely submission, not a particular product. To estimate the tax behind it all, use our Self-Employed Tax Calculator and check whether payments on account apply.

How the quarterly rhythm works in practice

The single biggest mental shift with MTD is moving from one annual scramble to a steady, four-times-a-year rhythm. Under the standard quarters running from 6 April, you send HMRC a short cumulative summary of your income and expenses after each three-month period, through compatible software. These updates are not finalised tax returns - you don't claim every relief or make adjustments four times a year - they are running totals that keep your figures current.

After the tax year ends, you bring everything together in a final declaration. This is where you confirm the year's position, add anything outside your business or property (such as other income), claim reliefs and allowances, and arrive at the figure you actually owe. It replaces the Self Assessment return you file today. The practical upside is that, if you keep records as you go, the final declaration becomes a review-and-confirm step rather than a year's worth of reconstruction. Our free MTD Quarterly Record Organiser is built around exactly this rhythm, tagging each entry to the right quarter so your summaries are ready when the deadlines come.

Common MTD mistakes to avoid

Because MTD is new, the early mistakes tend to cluster around the same few misunderstandings:

• Measuring profit instead of gross income. The thresholds are based on your combined gross turnover and rent before expenses, not your profit. This is the mistake that catches the most landlords.
• Assuming employment income counts. Salary, pensions, dividends and savings interest do not count towards the qualifying-income test - only self-employment and property do.
• Waiting until you're mandated. The businesses that find MTD painless are the ones already keeping tidy digital records. Starting early means no last-minute rush when your threshold date arrives.
• Treating quarterly updates like full returns. They are summaries; over-engineering them wastes time. The detail and the final number come at the final declaration stage.
• Buying expensive software you don't need. The demanding part is the record-keeping, not the filing. A low-cost bridging tool plus good digital records is enough for many.

Not sure whether any of this applies to you yet? Confirm your position with the free MTD Scope Checker or the Making Tax Digital for Income Tax checker before you change anything.

Frequently asked questions

Does MTD replace my Self Assessment tax return?

For those in scope, the quarterly updates plus a final declaration replace the annual Self Assessment return for your business and property income. The final declaration is where you confirm the full-year position.

How is the qualifying income threshold measured?

It's based on your combined gross income from self-employment and property - turnover and rent before deducting expenses. Other income such as employment or dividends is not counted towards it.

What happens if I'm below the threshold?

You're not mandated yet, and you continue with Self Assessment as normal. It's still worth keeping digital records voluntarily so you're ready if a lower threshold brings you into scope later.

Do quarterly updates change when I pay my tax?

No. MTD changes how and how often you report, not the amount of tax or the dates you pay it. Payments on account and the usual balancing payment continue to apply.