A guide to Making Tax Digital for Income Tax

What sole traders and landlords need to know about their legal obligations under the new Making Tax Digital for Income Tax rules

First launched in 2015 by the then chancellor George Osborne, Making Tax Digital (MTD) is the government’s project to modernise the tax system which requires business owners, self-employed people, and landlords to keep digital records and submit updates about their income and expenses to HM Revenue & Customs (HMRC) using software. 

The original plan was for full implementation by 2020, but due to the COVID-19 pandemic and feedback from groups representing businesses and accountants, the introduction of various elements of MTD have been delayed several times.  

The first stage finally launched in April 2019 with MTD for VAT. Businesses above the VAT threshold were required to keep digital records and submit VAT returns to HMRC using software. 

In April 2022, the requirement was extended to all VAT-registered businesses, regardless of turnover.  

MTD for Income Tax is the latest stage and it applies to sole traders and landlords. 

What is MTD for Income Tax?  

MTD for Income Tax applies to sole traders and landlords who get income from self-employment, property, or both. They need to keep digital records and submit quarterly updates about income and expenses and the annual tax return to HMRC using digital software.  

The scheme is being rolled out in phases. The first was introduced on 6 April 2026 and applies to sole traders and landlords with a turnover over £50,000. An estimated 864,000 people are affected by the first phase.  

The remaining phases begin on: 

• 6 April 2027: turnover over £30,000 
• 6 April 2028: turnover above £20,000 

The government has not yet confirmed if and when MTD for Income Tax will apply to those earning under £20,000. 

What are the MTD for Income Tax deadlines for 2026/27? 

Sole traders and landlords are required to submit updates about income and expenses four times during the tax year. They do not replace the annual tax return which still needs to be submitted by 31 January.   

The deadlines for the quarterly updates in 2026/27 are: 

Income and expenses period                 Deadline 

6 April 2026 to 5 July 2026                    7 August 2026 

6 April 2026 to 5 October 2026        7 November 2026 

6 April 2026 to 5 January 2027        7 February 2027 

6 April 2026 to 5 April 2027                    7 May 2027 

What are the penalties for missing the quarterly update deadlines? 

Due to being run as a ‘soft landing period,’ HMRC will not impose penalties for missing the quarterly update deadlines during 2026/27, the first year of MTD for Income Tax.  

From 2027/28, penalties will apply using a penalty point system. For each quarterly update or tax return deadline missed, a point will be applied. Once four points are reached, taxpayers will get a: 

• £200 penalty 
• £200 penalty each time they miss another submission deadline 

How do you submit MTD for Income Tax updates? 

Before submitting their first quarterly update, affected sole traders and landlords must register for MTD for Income Tax here. 

Quarterly updates need to be submitted using MTD-compatible software. HMRC is not providing its own software so you have to use a solution provided by commercial businesses. 

You can get software that creates digital records or connects to existing records, such as those in spreadsheets. You can submit your own updates, or your accountant or bookkeeper can do it for you.  

Find more details about the software you can choose here.  

Is anyone exempt from MTD for Income Tax? 

Some people are exempt from MTD for Income Tax. They include: 

• Partnerships.  
• If your qualifying income is £20,000 or less. 
• If you do not have a National Insurance number before the start of the tax year. 
• If you are digitally excluded due to reasons including your age, health condition or disability stops you from using a computer, tablet or smartphone to keep digital records or submit them to HMRC. 

There are more exemptions. The full list is here. 

Where can you get help with MTD? 

There are various ways you can access help and advice on complying with MTD.  

If you have an accountant, they should be able to answer your questions. Many business groups, networks, and associations may also be able to provide advice.  

The government has several videos and webinars explaining what is required for MTD for Income Tax. You can access recordings and sign up for future webinars here. 

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