Tax planning
Making Tax Digital: what you need to know
Making Tax Digital for Income Tax started in April 2026. Who's affected, the £50,000, £30,000 and £20,000 thresholds, quarterly deadlines and how to prepare.
By Foundry AccountantsUpdated 6 min read
Making Tax Digital (MTD) for Income Tax is now live. Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 have had to keep digital records and send quarterly updates to HMRC using compatible software, and the threshold drops to £30,000 in April 2027 and £20,000 in April 2028. If you're self-employed or rent out property, it's worth checking now which year it applies to you.
Key points
- MTD for Income Tax applies to sole traders and landlords, not to limited companies or partnerships.
- The test is your combined gross self-employment and property income, not your profit.
- Thresholds: over £50,000 from April 2026, over £30,000 from April 2027 and over £20,000 from April 2028.
- You'll send four quarterly updates a year, due 7 August, 7 November, 7 February and 7 May, then a final declaration by 31 January.
- All VAT-registered businesses already have to file VAT returns through MTD-compatible software.
Who does MTD for Income Tax apply to?
MTD for Income Tax covers individuals who have income from self-employment, property, or both. Whether you're in depends on your qualifying income: the total of your gross self-employment income and gross property income for the year, before any expenses are taken off.
Employment income, pensions, dividends and savings interest don't count towards qualifying income. Partnerships aren't in scope at the time of writing (September 2026), and limited companies aren't affected at all, because they pay Corporation Tax rather than Income Tax.
Some people are exempt or can defer joining. If you think that might be you, check with us before assuming either way.
When does it start for you?
HMRC uses the figures on an earlier tax return to decide when you join:
| You join from | If your qualifying income was over | Based on your tax return for |
|---|---|---|
| 6 April 2026 | £50,000 | 2024/25 |
| 6 April 2027 | £30,000 | 2025/26 |
| 6 April 2028 | £20,000 | 2026/27 |
A worked example
Sam is a self-employed decorator with turnover of £28,000 and costs of £10,000, so a profit of £18,000. Sam also rents out a flat for £6,000 a year.
Sam's qualifying income is £28,000 plus £6,000, which is £34,000. It doesn't matter that the taxable profit is much lower. Assuming similar figures on the 2025/26 return, Sam will need to use MTD from 6 April 2027.
This catches many people out. A landlord with £32,000 of rent and a large mortgage may make little profit but still be over the £30,000 threshold.
What you'll need to do
Keep digital records
You'll need to record your business income and expenses digitally, in software or in spreadsheets linked to HMRC through bridging software. Each transaction needs a date, an amount and a category. Paper records and a year-end tally won't meet the rules.
Send quarterly updates
Four times a year, your software sends HMRC a summary of your income and expenses to date. The deadlines are:
| Quarter | Period covered | Update due |
|---|---|---|
| 1 | 6 April to 5 July | 7 August |
| 2 | 6 July to 5 October | 7 November |
| 3 | 6 October to 5 January | 7 February |
| 4 | 6 January to 5 April | 7 May |
Quarterly updates aren't tax returns and you don't pay tax with them. They're a running summary, and you can correct errors in later updates or at the year end. If you have both a business and rental property, each needs its own updates.
If you joined in April 2026, your first update for 2026/27 was due on 7 August 2026, and the next is due on 7 November 2026.
Make a final declaration
After the tax year ends, you'll add any adjustments and other income, and confirm your figures through the software by 31 January. This final declaration replaces the traditional Self Assessment return. For 2026/27, that's due by 31 January 2028.
Paying your tax
The payment dates haven't changed. Tax is still due on 31 January, with payments on account on 31 January and 31 July where they apply. MTD changes how you report, not when you pay.
What happens if you miss a deadline?
MTD for Income Tax uses a points-based penalty system for late submissions. Each missed deadline earns a point, and a financial penalty only arrives once you reach a set number of points. Points can expire if you then meet your deadlines for a period. Late payment is dealt with separately, with penalties and interest.
The practical message is that one late update won't cost you money straight away, but repeated lateness will.
How to get ready
If you're joining in April 2027, now is a good time to start:
- Check your qualifying income. Add up your gross self-employment and property income for 2025/26.
- Choose your software. Pick an MTD-compatible product that suits how you work. If you have an accountant, it helps to use something they support.
- Open a separate business bank account if you haven't already. It makes digital record keeping far simpler.
- Start keeping digital records early. A few months of practice before April 2027 means the first quarterly update isn't a scramble.
- Decide who does what. Some people like to record transactions themselves and have their accountant check and submit the updates. Others hand over the whole process.
Our guides for the self-employed and landlords explain how we support each group.
What about VAT?
MTD for VAT has applied to all VAT-registered businesses for some time, whatever their turnover. If your business is VAT registered, you should already be keeping digital records and filing through compatible software. Registration is compulsory once your taxable turnover goes over £90,000 in any rolling 12-month period. Our VAT returns service covers this.
Frequently asked questions
Do I still need to file a Self Assessment tax return?
Once you're in MTD for Income Tax, the final declaration you make through your software replaces the traditional return. It's due by the same 31 January deadline. If you're not yet in MTD, you carry on filing a Self Assessment return as normal. Either way, the payment dates for your tax stay the same.
Does MTD apply to my limited company?
No. MTD for Income Tax is for individuals with self-employment or property income. Limited companies pay Corporation Tax and aren't in scope. However, if your company is VAT registered it must already use MTD for VAT. If you personally own rental property outside the company, your property income could still bring you into MTD for Income Tax.
Can I keep using spreadsheets?
Yes, as long as you link them to HMRC with bridging software, which sends the quarterly updates on your behalf. That said, many people find dedicated bookkeeping software easier once the quarterly routine starts, because it connects to your bank feed and does much of the categorising for you. It's worth trying both before April 2027.
How Foundry can help
We can set up your software, keep your records up to date and send your quarterly updates and final declaration, so MTD becomes routine rather than a quarterly headache. Our bookkeeping service is built around it. If you'd like to check when MTD applies to you, book a free consultation.
This article is general guidance based on the rules for the 2026/27 tax year and isn't personal advice. Speak to us before acting on it.
