Making Tax Digital for Income Tax is no longer a future change to plan for. It is here. The first phase came into force on 6 April 2026, and for many sole traders and landlords the first quarterly deadline arrives on 7 August 2026. If you are within scope, the time to act is now.
This guide explains what Making Tax Digital for Income Tax means, who it affects, the deadlines you need to know, and the practical steps to take so that your first year runs smoothly rather than becoming a last-minute scramble.
What Is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax (often shortened to MTD for Income Tax, or MTD ITSA) is HMRC’s new way of reporting income from self-employment and property. It replaces the familiar once-a-year Self Assessment return with two new obligations:
- Keeping your income and expense records digitally, using compatible software.
- Sending HMRC a summary of your income and expenses every quarter, followed by a single Final Declaration after the tax year ends.
In short, the annual paper return and the spreadsheet kept “for the accountant at year end” are being replaced by digital records and regular quarterly updates.
Who Is Affected, and When?
HMRC is introducing the rules in phases, based on your level of income:
- From 6 April 2026: sole traders and landlords with qualifying income above £50,000.
- From 6 April 2027: the threshold drops to £30,000.
- From 6 April 2028: the threshold drops again to £20,000.
The rules apply to individuals with income from self-employment, from property, or from both. Partnerships and limited companies are not in scope at this stage.
The Most Common Trap: “Qualifying Income” Means Gross, Not Profit
This is the single biggest point of confusion, so it is worth being clear. Your qualifying income is your gross income, before any expenses are deducted. It is not your profit.
If you have more than one source, the figures are added together. For example, a landlord with £27,000 of rental income and £25,000 of self-employed turnover has £52,000 of qualifying income, and is therefore within the first phase from 6 April 2026, even though the profit may be far lower.
Your start date is based on the income reported on your previous Self Assessment return. Mandation from April 2026 is determined by the figures on your 2024/25 return, which was due by 31 January 2026.
What Changes in Practice
There are three practical changes to be aware of.
Digital record keeping. From the start of the tax year, you must keep your business and property records in a digital format using MTD-compatible software. If you prefer to keep your records in a spreadsheet, you will need bridging software to connect it to HMRC.
Quarterly updates. Four times a year, you will send HMRC a running summary of your income and expenses for each business or property source. These are updates, not full returns, and you do not have to finalise every figure at this stage.
The Final Declaration. After the tax year ends, you will confirm your figures, claim any reliefs and allowances, and declare any other income through a single Final Declaration. This replaces the Self Assessment tax return.
Key Dates for 2026/27
For those mandated from 6 April 2026, the standard quarterly deadlines are:
- First quarter (6 April to 5 July 2026): due by 7 August 2026.
- Second quarter (6 July to 5 October 2026): due by 7 November 2026.
- Third quarter (6 October 2026 to 5 January 2027): due by 7 February 2027.
- Fourth quarter (6 January to 5 April 2027): due by 7 May 2027.
- Final Declaration for 2026/27: due by 31 January 2028.
The 31 January date will be familiar, because the deadline to file your Final Declaration and to pay any tax due remains the same as it is under Self Assessment today.
A Softer First Year
HMRC has confirmed a period of grace for the first year. No late-submission penalty points will be charged for late quarterly updates during the 2026/27 tax year. This is helpful, but please note two important limits: the relief does not apply to the Final Declaration, and it does not apply to late payment of tax. You must still keep digital records from day one, and you must still pay on time.
What You Should Do Now
If you think you may be within the first phase, the following steps will put you in a strong position:
- Confirm whether you are in scope. Check your gross self-employment and property income on your 2024/25 return against the £50,000 threshold.
- Choose your software early. Select MTD-compatible software, or bridging software if you wish to keep using spreadsheets, and give yourself time to learn it before the first quarter closes.
- Separate your business banking. A dedicated business bank account makes digital record keeping far simpler and reduces errors.
- Get into the habit of recording as you go. Quarterly updates are much easier when your records are kept up to date throughout the period, rather than reconstructed at the deadline.
- Ask if you are unsure. If you are uncertain whether you fall within the first phase or a later one, or which software suits your circumstances, take advice now rather than close to a deadline.
Are You Exempt?
Some people are not required to join, including those with qualifying income below the relevant threshold and certain individuals who are digitally excluded. Specific rules also apply to a small number of groups, such as foster carers and some non-resident entertainers. If you believe an exemption may apply to you, it is worth confirming your position rather than assuming.
How ISA Consortium Can Help
Making Tax Digital is a significant change, but it does not have to be stressful. At ISA Consortium, we work with sole traders and landlords across Hertfordshire and beyond, and we can:
- Confirm whether and when you are mandated, and explain exactly what it means for you.
- Recommend and set up the right MTD-compatible software for your circumstances.
- Take care of your digital record keeping and quarterly updates on your behalf.
- Prepare and submit your Final Declaration, so that nothing is missed.
If you would like to make sure you are ready well before the 7 August deadline, please get in touch to arrange a free, no-obligation conversation.
This article is for general information only and does not constitute tax advice. The rules summarised here may change, and your own position should be discussed with us based on your individual circumstances.
