Making Tax Digital for Income Tax changes how sole traders and landlords earning over £50,000 record and report figures to HMRC. From 6 April 2026, anyone with qualifying income above that threshold must keep digital records, send cumulative quarterly summaries through compatible software, and complete their annual tax return digitally.

The rules do not create a new tax or require you to submit four separate tax returns. What they change is the rhythm of record-keeping throughout the year. If you currently reconstruct your figures from bank statements shortly before the Self Assessment deadline each January, that approach will not work under MTD.

This guide covers how the £50,000 threshold is calculated, what counts as qualifying income, what digital records you need and when, how quarterly updates work, and what practical steps are worth taking now. If you are below the threshold today, it also covers the lower limits that follow in 2027 and 2028.

The first mandatory phase applies from 6 April 2026 to sole traders and landlords whose qualifying income for the 2024/25 tax year was more than £50,000. HMRC may write to you, but you should check your own position rather than waiting for a letter.

Qualifying income is broadly your gross sole-trader turnover plus your gross property income — before expenses and before tax. If you are a sole trader with £58,000 of sales and £22,000 of expenses, your qualifying income is £58,000, not £36,000. The threshold is based on gross income, not profit.

Income from different businesses and properties is combined. If you receive £27,000 of gross rental income and £26,000 of gross trading income, your total qualifying income is £53,000. Neither source exceeds the threshold individually, but together they bring you into scope. The same logic applies if you own several properties or run more than one trade.

For jointly owned property, your share of the gross rental income will normally count towards your qualifying income. If you are only told your share after expenses have already been deducted, HMRC may use that net figure when assessing your position.

The following income types do not generally count towards the threshold: employment income, pension income, dividends, savings income, and your share of partnership profits as an individual partner. You may still need to include these on your annual return, but they do not determine whether you must join MTD.

HMRC's guidance on MTD eligibility and start dates explains the phased rules and when you may need to join. If you are outside the first phase, the timetable is: qualifying income over £30,000 in 2025/26 brings you in from 6 April 2027, and qualifying income over £20,000 in 2026/27 brings you in from 6 April 2028.

If you are within scope, you must create and store digital records of your relevant business and property income and expenses. Each record should normally show the amount, the transaction date, and the appropriate Self Assessment category. HMRC's digital record-keeping guidance for MTD Income Tax sets out the detail.

Your digital records will typically cover: sales, fees, rent and other receipts; stock and materials; travel and office costs; finance and professional costs; repairs and other property expenses. The key change is that you must maintain these records throughout the year, not reconstruct them once annually.

You need to keep and report figures for each sole-trader business and each property business separately. This matters if you run more than one trade, or if you receive both UK and overseas property income. UK property income is generally treated as one UK property business even if you own several properties, so you do not normally need a separate quarterly update for each individual rental. Foreign property income may need to be recorded separately.

Some taxpayers below the VAT registration threshold may be able to use less detailed expense categories, depending on the rules that apply to them. Either way, you should still retain receipts, invoices, and bank statements as supporting evidence, even though you do not submit each document with your quarterly updates.

Spreadsheets remain an option, but only if they connect to compatible bridging software and the required information moves digitally between systems. A standalone spreadsheet cannot submit quarterly updates or your annual return to HMRC, and manually retyping figures from one system into another breaks the required digital links and increases the risk of errors.

Your quarterly updates are cumulative summaries, not four separate sets of accounts. Each update covers the period from the beginning of the tax year to the end of the relevant reporting period. The deadlines for the first mandatory year are:

If you use calendar update periods, your first reporting period may begin on 1 April, but the four submission deadlines remain unchanged.

Each quarterly update contains your software's totals of digital income and expense records for the relevant period. You do not include full accounts, capital allowances, private-use adjustments, or year-end tax entries at this stage, and you do not send individual receipts or invoices to HMRC. The quarterly updates are progress reports; the annual return is where you finalise business and property figures, include other income, make tax adjustments, and claim allowances and reliefs.

The annual Self Assessment deadline of 31 January does not change under MTD — for 2026/27 it remains 31 January 2028 — and the existing payment-on-account timetable continues. MTD changes how you report; it does not introduce quarterly Income Tax payments.

HMRC will not apply penalty points for late quarterly updates during 2026/27, the first mandatory year. However, the updates remain compulsory, and you must submit them before you can file your annual return. The first-year concession does not remove the obligation.

An exemption may apply if using digital tools is not reasonable or practical because of your age, disability, location, religious beliefs, or another relevant reason. Being unfamiliar with accounting software, having relatively few transactions, or needing to pay for a subscription does not automatically qualify you. You will usually need to apply to HMRC and set out why digital systems are not workable for you. Check the formal criteria rather than assuming you qualify.

MTD does not change the amount of tax you owe, but it is likely to create additional costs: compatible accounting software or bridging software, bookkeeping clean-up or migration if your records are not yet digital, regular transaction processing throughout the year, and accountant or bookkeeper reviews before each submission. The Making Tax Digital support available from OD Accountants can help you review your current setup before reporting problems arise.

More current records can also give you earlier visibility over your profit, cash flow, and likely tax liability. Your quarterly figures can provide a useful estimate of what you may owe, but they will not always show the final amount. Capital allowances, losses, pension contributions, other income, and year-end adjustments may still change the bill. Treat any software estimate as a planning figure, not a confirmed liability.

If your income is below £50,000 now, you should still check whether the £30,000 or £20,000 thresholds that apply in 2027 and 2028 are likely to catch you. Testing suitable software and improving your bookkeeping before a mandatory start date is considerably easier than making a rushed change just before your first quarterly deadline.

One low-income year does not automatically end your MTD obligation. If your qualifying income stays below the relevant threshold for three consecutive tax years, you may be able to opt out — but you should check your combined income position carefully, particularly if you have both trading and property income, before taking that step.

If your qualifying income was above £50,000 in 2024/25, the following steps are worth working through now:

1. Review your 2024/25 Self Assessment return and confirm your combined gross trading and property income.
2. Check whether an exemption may apply to your circumstances.
3. Complete your MTD sign-up with HMRC.
4. Confirm that your software supports quarterly updates and your annual return.
5. Create digital records from the correct start date.
6. Separate each relevant business or property source within your records.
7. Reconcile your bank accounts regularly throughout the year.
8. Agree responsibilities clearly with your accountant or bookkeeper, including cut-off dates before each quarterly deadline.

If you have already missed the April 2026 start, reconstruct your records accurately and bring your submissions up to date. Rough estimates will cause problems at the annual return stage and are harder to correct than starting properly from a clean base.

An accountant can assist with your MTD sign-up, connect your compatible software, review your digital records, submit quarterly updates as your authorised agent, and complete your annual return. You remain responsible for providing complete information and approving the final submission, so agreeing clear responsibilities from the outset matters. The Self Assessment tax return service from OD Accountants can bring your quarterly records, final adjustments, and relief claims into one year-end process, so your annual return does not become a last-minute exercise disconnected from the records you have maintained all year.

Errors found after an update has been submitted can be corrected in your digital records and reflected in later submissions and the annual return, because updates are cumulative. Regular bank reconciliations help you catch missing income, duplicated costs, and transactions in the wrong category before they compound.