MTD for Income Tax: what actually changes

From 6 April 2026, the way a large number of sole traders and landlords report their income to HMRC changed for good. If it has not reached your business yet, it almost certainly will within the next two years. Here is what actually changes, and what does not.

The short version

Making Tax Digital for Income Tax replaces one annual Self Assessment return with digital record keeping and four quarterly updates, followed by a final declaration at the end of the year. All of it goes to HMRC through compatible software. You can no longer type figures into an online form.

When it applies to you

It is being phased in by income level, and each phase is judged on an earlier tax year. According to HMRC's own guidance:

• 6 April 2026 if your qualifying income was more than £50,000 in the 2024 to 2025 tax year
• 6 April 2027 if it was more than £30,000 in the 2025 to 2026 tax year
• 6 April 2028 if it was more than £20,000 in the 2026 to 2027 tax year

The Association of International Accountants estimates the final phase alone brings roughly a further 900,000 taxpayers into the system.

The detail most people get wrong

Qualifying income means turnover, not profit. This is the single most common misunderstanding we see. It is your gross income from self-employment and property, before you deduct a single expense. A sole trader turning over £58,000 and making £24,000 of profit is inside the first phase, not outside it.

Not all income counts. Qualifying income covers self-employment and UK property only. Partnership profit share, dividends, savings interest, PAYE employment income and pensions are excluded from the test, even though they still go on your tax return.

HMRC will not sign you up. There is no automatic enrolment. Signing up is on you, or on your agent acting for you.

Getting under the threshold later does not release you. Once you are in, you stay in until your qualifying income has been below the threshold for three consecutive years.

What the year now looks like

Four quarterly updates, each a summary of income and expenses for the period, submitted through software. Then a final declaration after the year end that pulls everything together, applies reliefs and allowances, and produces the tax figure. The quarterly updates are summaries, not four separate tax bills, and your payment dates do not change.

Two things follow from that. First, your bookkeeping has to be current all year rather than reconstructed each January. Second, if your records are already on cloud software and kept up to date, the change is genuinely minor.

What is not changing

Your payment deadlines are the same. Your allowances and reliefs are the same. And Making Tax Digital for Corporation Tax is not going ahead, which HMRC has now confirmed, so limited companies are unaffected by this particular change. Partnerships will be brought in eventually, but no start date has been set.

What to do about it

1. Work out your qualifying income for the relevant year, using turnover rather than profit, and add every trade and property together.
2. Get onto compatible software before you are mandated, not in the week it starts. The people who found the VAT rollout painless were the ones already keeping digital records.
3. Fix the record keeping habit first. Software does not help if receipts still arrive in a carrier bag in December.
4. Consider signing up voluntarily if you are close to a threshold. A year of practice with no penalty exposure is worth having.

If you are not sure which phase you fall into, send us your last set of figures and we will tell you in five minutes. It is a quick answer, and it is better to have it now than in the first quarter it applies.

Source: HMRC, "Find out if and when you need to use Making Tax Digital for Income Tax", GOV.UK. Phase estimate from the Association of International Accountants.