Making Tax Digital for Income Tax: the plain-English guide

Making Tax Digital for Income Tax — MTD for short — is the biggest change to how self-employed people and landlords report their income since Self Assessment arrived in the 1990s. From April 2026 it stops being optional for the first group of taxpayers, and the practical question stops being "what is it?" and becomes "am I in, and what do I need to do?"

The honest answer is that MTD is less frightening than the headlines suggest, but it does change your routine — and the people who find it painful will mostly be the ones who leave everything to the last minute. This guide covers who is in scope, what you will actually have to do, and what is worth doing now.

What MTD for Income Tax is

Under Self Assessment as you know it, you keep records however you like all year, then compile one tax return after the year ends. Under MTD you must instead:

1. keep your business records digitally, in software that can talk to HMRC;
2. send HMRC a short quarterly update of your income and expenses, four times a year; and
3. finish with a final declaration after the tax year ends, which replaces the Self Assessment return you file today.

That is the whole scheme. There is no new tax, and — a point that surprises many people — no new payment dates. You still pay your Income Tax by 31 January, exactly as now.

Who has to join, and when

MTD for Income Tax applies to individuals with qualifying income from self-employment, property, or both. Qualifying income means gross income — your turnover and rents added together before any expenses are deducted. It is not your profit. A sole trader with £55,000 of sales and £30,000 of costs is over the £50,000 line even though their profit is nowhere near it.

The start dates are staged:

• 6 April 2026 — anyone with qualifying income over £50,000
• 6 April 2027 — the threshold drops to £30,000

HMRC works out which group you are in from the tax return you have already filed, so the return covering 2024/25 effectively decides whether April 2026 applies to you. The government has said the threshold will fall further in later years — check GOV.UK for the current position.

Outside scope for now: partnerships (they will be brought in later, with no date yet fixed) and limited companies, which are not covered by MTD for Income Tax because they pay Corporation Tax instead. If you genuinely cannot use digital tools — for reasons of disability, age, location or religion — you can apply to HMRC for an exemption as "digitally excluded".

Quarterly updates, without the fear

The quarterly update is the part people worry about, so it is worth being precise about what it is — and is not.

Each update is a summary of your business income and expenses for the year so far, sent from your software to HMRC. It is not a tax return. There are no accounting adjustments to make, no reliefs to finalise, no declaration to sign. If your records are up to date, the update is close to a button-press.

The standard quarters follow the tax year, with each update due by the 7th of the following month:

Quarter	Period covered	Update due by
1	6 April – 5 July	7 August
2	6 July – 5 October	7 November
3	6 October – 5 January	7 February
4	6 January – 5 April	7 May

(You can elect to use calendar quarters instead — 1 April to 30 June and so on — if that suits your bookkeeping better.)

Two reassuring details. First, updates are cumulative: each one covers the year to date, so a mistake in quarter one is corrected simply by getting it right in quarter two. Second, the tax adjustments you are used to — capital allowances, use-of-home claims, private-use adjustments — happen once, at year end, not every quarter.

Late updates attract penalty points rather than an instant fine, with a financial penalty only once you cross a points threshold. Persistent lateness is what gets expensive.

The final declaration

After 5 April you finish the year much as you do today: your software brings the four quarters together, you (or whoever does your books) make the year-end adjustments, add any other income — employment, dividends, bank interest — and submit a final declaration by 31 January. Payment deadlines are unchanged, including payments on account if they apply to you.

What to do now

1. Work out your qualifying income. Add gross self-employment turnover and gross rents from your last filed return. Over £50,000 means April 2026 applies to you; over £30,000 means pencil in April 2027.
2. Stop keeping paper-only records. Digital record-keeping is the habit that makes everything else trivial. A shoebox of receipts in January is exactly what MTD punishes.
3. Choose MTD-compatible software — or a bookkeeping service that includes it. HMRC publishes a list of compatible software on GOV.UK.
4. Sort your bank account. A separate business account is not a legal requirement for sole traders, but it makes digital bookkeeping dramatically cleaner.
5. Agree who sends the updates. You, your bookkeeper, or a mix — decide before the first deadline, not during it.

Where we fit in

Elizabeth Bookkeeping was built with MTD in mind rather than retro-fitted to it. Your records are digital from the moment a receipt or bank statement arrives, and the bookkeeping follows a simple division of labour: AI drafts. AgentLedger validates. People approve. Quarterly updates are prepared from records a person has already signed off, and nothing goes to HMRC without your agreement.

If you would like to know how MTD would work for your business in practice, Ask for Details and we will walk you through it.