Making Tax Digital for Income Tax is no longer a consultation paper or a delayed pilot. Since 6 April 2026 it has been the law for sole traders and landlords with qualifying income above £50,000, and the £30,000 cohort joins in April 2027. If you’ve been waiting for it to be quietly shelved again, stop — and read this instead.

TL;DR

  • MTD for Income Tax went live on 6 April 2026 for gross income over £50,000; £30,000 follows in April 2027; £20,000 in April 2028.
  • “Qualifying income” means gross turnover from self-employment plus property, before expenses — not your profit.
  • You’ll need MTD-compatible software, four quarterly updates, and a final declaration by 31 January.
  • A new points-based penalty regime applies, with a £200 charge once you hit the threshold.
  • HMRC writes to those it believes are in scope, but the legal duty to comply sits with you.

What MTD for Income Tax actually is

MTD for Income Tax Self Assessment (often shortened to MTD for ITSA) is HMRC’s biggest shake-up of personal tax administration in a generation.

Instead of pulling together a single Self Assessment return once a year, affected taxpayers now keep digital records of their business and property income throughout the year, send a summary to HMRC every three months, and then finalise their tax position after the tax year ends. The aim, from HMRC’s perspective, is fewer errors, faster collection, and a tax system that talks to software rather than spreadsheets stuffed in a drawer.

From your perspective, it’s a change in rhythm. Tax stops being a January panic and becomes a quarterly housekeeping job. Done well, it can actually reduce stress and give you a clearer view of what you owe. Done badly, it’s four chances a year to miss a deadline instead of one.

Are you in scope? The thresholds explained

Whether MTD for Income Tax applies to you depends on your qualifying income and the tax year you’re in.

The phased timetable

  • From 6 April 2026: sole traders and landlords with qualifying income above £50,000.
  • From April 2027: qualifying income above £30,000.
  • From April 2028: qualifying income above £20,000.

HMRC looks at the figures on your most recent submitted Self Assessment return to decide which cohort you fall into. So your 2024/25 return, filed by 31 January 2026, determined whether you were mandated from 6 April 2026. Your 2025/26 return will determine the April 2027 cohort, and so on.

What “qualifying income” really means

This is where most people trip up. Qualifying income is your gross income — turnover before any expenses — from self-employment and from property, added together. It is not your taxable profit.

A landlord with £28,000 of rent and a sole trader sideline turning over £14,000 has qualifying income of £42,000, even if their combined profit after mortgage interest and expenses is barely £15,000. They’re outside the 2026 cohort but firmly inside the 2027 one.

Income that does not count toward the threshold includes:

  • PAYE employment income
  • Dividends
  • Pension income
  • Bank and savings interest
  • Capital gains

So a consultant earning £80,000 through PAYE and £18,000 from a small rental flat is not currently in scope — the £80,000 salary is ignored for the threshold test.

The single biggest misunderstanding we see is people checking their profit against the threshold. HMRC is looking at gross turnover. If your business and rental income together tip the limit, you’re in — even if your profit is modest.

What you’ll actually have to do

If you’re in scope, three obligations apply.

1. Keep digital records

Every item of business or property income and expenditure must be recorded digitally, using software that meets HMRC’s MTD specification. A shoebox of receipts and an Excel total at year-end no longer satisfies the rules. Bridging software can connect spreadsheets to HMRC, but the underlying records still need to be digital and updated regularly.

2. Send quarterly updates

Four times a year you’ll submit a summary of income and expenses for each business and property source. These are cumulative figures sent through your software direct to HMRC. The standard quarter ends are 5 July, 5 October, 5 January and 5 April, with submissions due by the 7th of the following month. You can elect for calendar quarter ends (30 June, 30 September, 31 December, 31 March) if that aligns better with your bookkeeping.

Quarterly updates are not mini tax returns. They don’t trigger a tax payment and they don’t need to be perfect — they can be corrected in later submissions. But they do need to be sent on time.

3. Submit a final declaration

After the tax year ends, you confirm the final figures, add any other income (employment, dividends, savings, gains), claim reliefs, and submit a final declaration. This replaces the Self Assessment return for those in MTD. The deadline remains 31 January following the end of the tax year, and the tax payment deadlines are unchanged.

The new penalty regime

HMRC has rolled out a points-based system for late submissions, which applies to MTD for Income Tax filers.

Every missed quarterly update or late final declaration earns you a point. Once you hit the threshold — four points for quarterly filers — a £200 penalty is charged. Each further late submission while at the threshold triggers another £200. Points expire after a period of good compliance, but only if you stay clean.

Late payment penalties operate separately and have also been reformed, with interest accruing from the day after the due date. The direction of travel is unmistakable: HMRC wants regular, on-time engagement, and the cost of drifting is higher than under the old £100 fixed penalty.

Two ways to approach the transition

You broadly have two options, and the right one depends on how you currently keep your records.

Option A: DIY with cloud software

If you’re already comfortable with technology, you can pick an MTD-compatible package — there are several reputable providers — connect your bank feed, and learn to categorise transactions yourself. Costs typically run £15-£40 a month. You keep full control, you see your numbers in real time, and you only call in an accountant for year-end advice or the final declaration.

The trade-off is time and the risk of miscategorising. Get the VAT treatment of a mixed-use property wrong, or misallocate capital versus revenue expenditure, and you’ll either overpay tax or invite an HMRC enquiry.

Option B: Outsourced bookkeeping with quarterly review

Hand the bookkeeping to your accountant or a dedicated bookkeeper. They reconcile transactions monthly, prepare and submit your quarterly updates, and flag tax-planning opportunities as they spot them. You get a clearer picture, a lower risk of error, and the quarterly rhythm becomes a genuine business-review tool rather than a compliance chore.

It costs more in fees but typically saves time, reduces tax risk, and turns four annual touchpoints with your accountant into a continuous conversation. For landlords with multiple properties or sole traders running close to VAT registration, Option B usually pays for itself.

Exemptions and exclusions

Not everyone in scope by income will have to comply. HMRC recognises certain exemptions, including:

  • Digital exclusion: if you genuinely cannot use digital tools because of age, disability, location (no reliable broadband) or religious belief, you can apply for an exemption.
  • Certain trustees, personal representatives and non-resident companies are outside the regime.
  • Partnerships are not yet in scope; a start date for them has not been confirmed.

An exemption is not automatic — you have to apply and HMRC has to agree. If you think you qualify, don’t assume; get the application in well before your mandation date.

What to do next

If you’re already in the April 2026 cohort, your first quarterly update for the quarter ending 5 July 2026 was due by 7 August 2026. If you missed it, get current immediately — the points clock is already ticking. Talk to your accountant about catching up cleanly and whether any reasonable excuse applies.

If you’re heading into the April 2027 or April 2028 cohorts, use the runway. Add up your gross self-employment turnover and gross rental income for 2024/25 and 2025/26. If the total is north of £30,000, choose your software now, get your bank feeds connected, and run a “dry quarter” before mandation so the rhythm is familiar by the time it counts. Check the letter HMRC sends — but don’t rely on it; the legal obligation is yours regardless of whether the post arrives.

At Melon Accountants, we help sole traders and landlords work out exactly where they sit on the threshold, choose the right software for their situation, and take the quarterly filings off their plate entirely. If you’d like a straight answer on whether MTD applies to you and what it’ll cost to stay compliant, get in touch and we’ll talk it through.