Making Tax Digital for Income Tax has started — who's affected and what to do
After years of delays, Making Tax Digital for Income Tax finally went live on 6 April 2026. If you are a sole trader or landlord above the threshold, the way you report to HMRC has structurally changed — from one annual return to a digital, quarterly rhythm. Here is what that means in practice.
Who is in, and when?
From April 2026: anyone whose combined qualifying income from self-employment and property exceeded £50,000 in 2024–25. From April 2027 the threshold drops to £30,000, and from April 2028 to £20,000. It is total gross qualifying income across activities — a £35,000 sole trade plus £20,000 of rent puts you in scope at the first threshold, not the second.
Limited companies are not in scope — this is income tax. But a director with a side consultancy or rental income above the line is in, for that income.
What actually changes?
- Digital records. Income and expenses must be kept in software (or spreadsheets bridged by software) — a shoebox reconstructed annually no longer satisfies the rules.
- Quarterly updates. Four submissions a year per trade or property business, due one month and a few days after each quarter ends. They are cumulative summaries, not tax returns — no tax is due with them.
- A final declaration after year end, where accounting adjustments and reliefs are made and the year's position is confirmed. This replaces the traditional return for that income.
The penalties are points-based
Each missed quarterly deadline earns a point; hit the threshold and a fixed penalty lands, with more for continued failure. Points expire after a run of on-time submissions. The regime is more forgiving of a single slip than the old system — and much less forgiving of chronic lateness, which is exactly the behaviour annual deadlines used to hide.
What to do about it, practically
If you are already on clean, current bookkeeping in something like Xero, MTD is a non-event — the quarterly update is a by-product of records that already exist. If your records are an annual archaeology project, the work is not the filing, it is becoming the kind of business whose books are current. That is worth doing for reasons that have nothing to do with HMRC: you get a real-time view of profit, and January stops being a cliff.
One genuine planning point: the quarterly rhythm makes your emerging profit visible during the year, which makes setting money aside for the bill — and spotting a bad year early — dramatically easier. Treat MTD as the excuse to fix the bookkeeping, and the compliance takes care of itself.