Does It Apply to You Yet?
Making Tax Digital for Income Tax is now live. It started on 6 April 2026, and if your income from self-employment and property is over £50,000, it already applies to you. If you earn less than that, your start date is on its way.
This guide covers what has changed, who it affects and when, and what to do if you have not made the switch yet.
What is Making Tax Digital for Income Tax?
Making Tax Digital, or MTD, is HMRC’s move away from paper records and the annual self-assessment return. Instead, you keep your records digitally and send updates to HMRC through compatible software such as Xero.
The aim is a tax system that works closer to real time. Rather than one big January deadline, your figures build through the year, so you always know roughly where you stand.
MTD has applied to VAT-registered businesses for some time. The change from April 2026 is that it now covers income tax for sole traders and landlords too.
Does it apply to me?
That depends on your qualifying income. This is your gross income from self-employment and property combined, before any expenses come off.
The thresholds are being introduced in stages:
- From April 2026: qualifying income over £50,000
- From April 2027: qualifying income over £30,000
- From April 2028: qualifying income over £20,000
A few watch-outs:
First, it is turnover that counts, not profit.
Second, self-employment and property income are added together. So £28,000 from your business and £25,000 in rent puts you over the £50,000 line, even though neither figure does on its own.
HMRC determines who is in scope based on your most recent tax return. For the first wave, that was the 2024/25 return. If yours showed qualifying income over £50,000, you should be using MTD now.
The three things that actually change?
1. Digital records. Your income and expenses need to be recorded in MTD compatible software. Photographing receipts and capturing them digitally counts.
2. Quarterly updates. Every three months, your software sends HMRC a summary of your income and expenses. These are updates, not tax bills. Nothing is due when you send them.
3. A final declaration. At the end of the tax year, you confirm your figures and any other income through your software by 31 January. This replaces the self-assessment return.
Your tax payment deadlines do not change. You still pay by 31 January, with payments on account in July where they apply.
What about late submissions and penalties?
Late submissions work on a points system. Each missed deadline earns a point and once you hit the threshold, a £200 penalty applies.
The good news for the first wave: HMRC has confirmed a soft landing for the 2026/27 tax year, so no penalty points will be issued for late quarterly updates in year one. The full system kicks in from April 2027. It is breathing space, not a reason to put it off.
Are there any exemptions?
HMRC can grant an exemption if you genuinely cannot use digital tools, for reasons such as age, disability, religious beliefs, or no reliable internet access. You need to apply to HMRC directly and explain your situation. Exemptions are not automatic.
How do I get ready?
If MTD for Income Tax applies to you now, or will from April 2027, here is where to start:
1. Check your qualifying income. Add up your gross income from self-employment and property on your last tax return. That tells you when MTD applies to you.
2. Choose MTD compatible software. Xero is our platform of choice, and affordable plans start from a few pounds a month.
3. Sign up with HMRC for MTD for Income Tax, or ask your bookkeeper/accountant to handle it for you.
If your income is below £30,000, nothing changes for you yet. But the thresholds keep dropping, so it is worth knowing your numbers now rather than finding out by letter from HMRC.
NEED A HAND?
Plenty of the sole traders and landlords we speak to feel the same way about this: not against it, just short on time to sort it. That is where we come in. Lionheart Virtual Assistance is a Xero partner, and we set up and run MTD compliant bookkeeping for sole traders and landlords, from the initial software setup through to quarterly updates.
If you are not sure where you stand, book a no-obligation chat and we will work it out together.
Disclaimer: We make reasonable efforts to keep this content up to date, but we do not guarantee that it is current, accurate, or complete. This article is for general information purposes only and does not constitute legal, financial, or tax advice. Please seek professional advice before acting on anything here.
Want to learn more about bookkeeping? Read our articles:
Bookkeeper vs Accountant: What’s the Difference? – Read More
10 Tasks You Can Outsource to a VA in Just 1 Hour – Read More
A Complete Beginner’s Guide to Bookkeeping – Read More
Sources: HMRC Gov.UK (2018, May 31). Making Tax Digital Help and Support. Retrieved July 6, 2026, from https://www.gov.uk/guidance/help-and-support-for-making-tax-digital
HMRC Gov.UK (n.d.). Making Tax Digital Campaign. Retrieved July 6, 2026, from https://makingtaxdigital.campaign.gov.uk/
