On 6 April 2026, Making Tax Digital for Income Tax (MTD for IT) went live in the UK — the biggest change to self-assessment reporting since the tax was introduced. Approximately 864,000 sole traders and landlords with qualifying income over £50,000 are in the first wave, with more being pulled into scope each year until 2028.
Annual self-assessment is replaced with quarterly digital submissions to HMRC plus a final end-of-year declaration — five submissions a year instead of one. Paper records are no longer sufficient.
The phased rollout
| Date | Qualifying income threshold | Estimated affected |
|---|---|---|
| 6 April 2026 | Over £50,000 | ~864,000 |
| 6 April 2027 | Over £30,000 | ~1,077,000 additional |
| 6 April 2028 | Over £20,000 | Further tranche pulled in |
HMRC's overall projection is that around 2.9 million sole traders and landlords will be affected by the full MTD for IT roll-out.
Critical — MTD is based on turnover, not profit
A common misunderstanding is that MTD applies to profit. It does not. MTD uses qualifying income, which is essentially gross income from self-employment and property before expenses. Examples:
- A sole trader with £52,000 turnover but £12,000 net profit: IN scope from April 2026.
- A landlord with three rental properties grossing £40,000 in rent and a sole-trading sideline of £15,000: combined £55,000 qualifying income — IN scope from April 2026.
- A limited-company director drawing £50,000 in salary and dividends from their company: NOT in scope (this is employment and dividend income, not self-employment or property).
Partnerships are in scope where an individual partner's share of qualifying income exceeds the threshold.
What you have to do if you are in scope
- Sign up on GOV.UK before 6 April. You can use the same Government Gateway user ID as your existing self-assessment.
- Choose MTD-compatible software — HMRC does not provide its own. Options include QuickBooks, Xero, FreeAgent, Sage, and bridging tools for spreadsheets.
- Keep digital records of all income and expenses as they occur.
- Submit four quarterly updates to HMRC. The first quarter runs 6 April to 5 July, due 7 August 2026. Quarters can be aligned to calendar-month starts if easier, but deadlines do not change.
- Submit a final declaration by 31 January following the end of the tax year — replacing the traditional self-assessment return.
- Continue to file the 2025/26 return as normal by 31 January 2027 — MTD only applies to 2026/27 income and onwards.
The penalty regime
MTD uses a new points-based penalty system. Miss a deadline and you accrue a penalty point. When you reach the threshold, a £200 penalty applies — and each subsequent late submission adds another £200.
| Status | Points threshold |
|---|---|
| Mandatory MTD user | 4 penalty points before £200 fine |
| Voluntary opt-in user | 2 penalty points before £200 fine (but with a 12-month grace) |
HMRC has confirmed a 12-month grace period for 2026/27: those mandated from April 2026 will not receive penalty points for late quarterly updates in the first year. Late final declarations still carry standard penalties. Standard tax-late-payment interest rules also still apply.
Software options
HMRC publishes a list of approved MTD-compatible software on GOV.UK. In practice, most sole traders and landlords will fall into one of three groups:
- Full accounting software — QuickBooks, Xero, FreeAgent, Sage. Monthly costs typically £10–£40.
- Spreadsheet + bridging software — cheaper, more DIY. Works if you are disciplined with spreadsheets.
- Free or low-cost MTD-only tools — some platforms charge only when you submit; good for simple portfolios.
Who is exempt
Limited exemptions are available via HMRC for those who genuinely cannot use digital tools — typically because of disability, age, remote location or religious reasons. You must apply and provide evidence. Being unfamiliar with technology is not on its own sufficient grounds.
If your qualifying income genuinely falls below the £50,000 threshold (for April 2026), you are not mandated — but HMRC still recommends voluntary opt-in for cashflow and record-keeping benefits.
What brokers and accountants should know
- Agents can submit on behalf of clients — but must have an Agent Services Account with MTD authorisation.
- Five submissions, not four + one — the final declaration is an additional service, not a rebrand of the quarterly process.
- Time compression — instead of a single January crunch, there is a January + four additional quarterly crunches. Client fee structures may need to change.
- Cessation of business — if a client ceased all qualifying income sources before April 2026, they must notify HMRC to avoid being mandated in error.
Disclaimer
This article is for general information only and does not constitute tax or legal advice. MTD for IT rules, software requirements and HMRC guidance are evolving. Always check the latest GOV.UK guidance and consider consulting a qualified accountant for your specific circumstances.
FAQ
Do I still submit a self-assessment return?
You will submit a final declaration that replaces the self-assessment return, by 31 January following the tax year end. For 2026/27 income that is 31 January 2028.
What if I have multiple income streams?
Separate MTD submissions are required for UK self-employment, UK property income, and overseas property income (although all overseas properties can be in a single return).
Can I keep using spreadsheets?
Yes — but you also need MTD-compatible bridging software to submit the data to HMRC. Paper records alone do not meet the requirement.
