What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax (MTD for ITSA) requires self-employed people and landlords to keep digital records and submit quarterly updates to HMRC instead of a single annual self-assessment return. It launches from 6 April 2026 for those with qualifying income above £50,000. From April 2027, the threshold drops to £30,000.

Who does Making Tax Digital affect from April 2026?

From 6 April 2026, MTD for ITSA applies to self-employed individuals and landlords with qualifying income (self-employment income plus property income) above £50,000 per year. Approximately 780,000 people are affected from April 2026. The threshold drops to £30,000 from April 2027.

What do I need to do for Making Tax Digital?

You need: HMRC-recognised MTD-compatible software (e.g. QuickBooks, Xero, FreeAgent, Sage); to keep digital records of all income and expenses; to submit quarterly updates to HMRC (by 7 August, 7 November, 7 February, 7 May); and to submit a final declaration by 31 January following the tax year. The January 31 self-assessment deadline remains for the final declaration.

Are there penalties for not complying with MTD?

HMRC confirmed it will not apply late submission penalties for MTD quarterly updates in the first year (2026/27). The penalty regime for late MTD submissions will start from April 2027. However, late payment penalties and interest still apply from the start. You must still sign up for MTD and use compatible software — simply ignoring it is not an option.

Making Tax Digital 2026: MTD for Income Tax — Deadlines, Who It Affects & How to Comply

Making Tax Digital for Income Tax is the biggest change to UK tax administration in decades. From 6 April 2026, quarterly digital reporting replaces the annual self-assessment return for hundreds of thousands of self-employed people and landlords. Mandatory April 2026

Making Tax Digital — Who Is Affected and When

Group	Income Threshold	MTD Start Date
Self-employed (sole traders)	Above £50,000 qualifying income	6 April 2026
Landlords (property income)	Above £50,000 qualifying income	6 April 2026
Both self-employed and landlord (combined)	Above £50,000 combined	6 April 2026
Self-employed / landlords (lower income)	£30,001–£50,000	6 April 2027
Self-employed / landlords (lowest income)	£20,001–£30,000	TBC (likely 2028+)
Partnerships	All	TBC
Employees / PAYE only	N/A	Not affected

Source: Morningstar UK Tax Calendar 2026; HMRC Making Tax Digital guidance. The Autumn 2025 Budget confirmed MTD for ITSA launches April 2026 for income above £50,000, with penalty grace period for 2026/27.

MTD Quarterly Submission Deadlines

Quarter	Period Covered	Submission Deadline
Quarter 1	6 April – 5 July	7 August
Quarter 2	6 July – 5 October	7 November
Quarter 3	6 October – 5 January	7 February
Quarter 4	6 January – 5 April	7 May
Final Declaration	Full tax year	31 January (following year)

MTD Compatible Software Options

Software	Price	Best For	HMRC Recognised
QuickBooks	From £12/month	Self-employed, small business	Yes
Xero	From £16/month	Landlords, contractors	Yes
FreeAgent	From £11/month (or free with NatWest/RBS)	Freelancers, sole traders	Yes
Sage Accounting	From £15/month	Broader business needs	Yes
HMRC's free tools	Free (limited)	Simplest cases only	Yes
Spreadsheets + bridging software	Varies	Excel users — bridging software required	With approved bridging

HMRC has a full list of MTD-compatible software at gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax. You cannot use regular spreadsheets without approved bridging software.

What MTD Means in Practice

Before MTD: You recorded income and expenses throughout the year (however you wished) and filed one self-assessment return by 31 January. After MTD: You must keep digital records in MTD-compatible software throughout the year, submit a summary of income and expenses to HMRC four times per year (quarterly), and then submit a final declaration by 31 January. The quarterly submissions are informational — they do not require immediate tax payment. Payment deadlines remain: 31 January (balancing payment + first payment on account) and 31 July (second payment on account).

MTD Penalties — What HMRC Has Confirmed

HMRC confirmed it will not impose late filing penalties for MTD quarterly submissions during the first year (2026/27). This is a grace period to allow businesses and landlords to adjust. However: you must still sign up for MTD and use compatible software from April 2026; late payment penalties and interest continue to apply from the start; and the penalty grace period ends April 2027 when the full penalty regime begins. Simply ignoring MTD is not a compliant approach — HMRC can issue penalties for failure to maintain digital records.

KAELTRIPTON VERDICT

If you earn above £50,000 from self-employment or property in 2026/27, Making Tax Digital applies to you from 6 April 2026. Start now: choose MTD-compatible software, set up your digital records, and register with HMRC. The quarterly submission penalty grace period runs through 2026/27 — but you must still comply with the digital record-keeping requirement. Those with income £30,001-£50,000 join in April 2027.

Mandatory from 6 April 2026

Q: What is Making Tax Digital?

A: Quarterly digital reporting to HMRC, replacing annual self-assessment for self-employed people and landlords with qualifying income above £50,000 from April 2026.

Q: Who does MTD affect from April 2026?

A: Self-employed people and landlords with income above £50,000. Approximately 780,000 people. Drops to £30,000 threshold from April 2027.

Q: What software do I need?

A: HMRC-recognised MTD software. Options include QuickBooks, Xero, FreeAgent, Sage. Free tools available for simplest cases. Regular spreadsheets need bridging software.

Q: Are there MTD penalties?

A: Quarterly submission penalties waived in 2026/27 (grace period). Late payment penalties and interest apply from the start. Full penalty regime from April 2027.

This article is for informational purposes only and does not constitute financial or tax advice. Always consult a qualified accountant or tax adviser for your personal circumstances. All rates and figures verified from GOV.UK and official sources, April 2026.