Making Tax Digital for Income Tax: rules, dates and software

Making Tax Digital for Income Tax is HMRC’s new way for sole traders and landlords to do Self Assessment. Instead of pulling everything together once a year, you keep digital records in software as you go and send HMRC a summary of each business four times a year.

At the end of the year you make adjustments, add any other income and submit your tax return through the same kind of software. The way you pay tax and the payment dates do not change.

It applies to individuals with self-employment or property income above a threshold. Partnerships will need to use it in the future, but not yet.

Your start date depends on your qualifying income, which is your self-employment and property income before expenses. HMRC tests it on the tax return you sent for an earlier year, as the table shows. Each threshold means more than that figure.

Employment income, dividends, pensions and your share of partnership profit do not count. For jointly owned property, only your share counts. HMRC writes to you if you are over the threshold, but if no letter arrives it is still your responsibility to check.

Once you are in, you can only leave if your qualifying income is below the threshold for 3 tax years in a row.

Some people are exempt automatically and do not need to apply. That includes anyone with qualifying income of £20,000 or less, and anyone without a National Insurance number before the tax year starts. Some groups, such as people whose 2024 to 2025 return claimed averaging relief or qualifying care relief, are exempt until at least April 2027. Conditions apply to each exemption.

You can apply for an exemption if you are digitally excluded. That means it is not reasonable for you to use software because of your age, health or disability, your religious beliefs, or because you have no internet access at home or at your business and no suitable alternative. HMRC will refuse an application whose only reason is that you are unfamiliar with software or that it would take extra time or cost.

You apply by phone or in writing. HMRC aims to reply within 28 calendar days, and you can appeal within 30 days of the decision letter. If you are exempt, you still send a Self Assessment return as normal.

To sign up you must be registered for Self Assessment and have sent a tax return in the last 2 years. You can sign up yourself, or an agent can sign you up. Volunteers can join for the current or the next tax year.

From September 2026, HMRC began signing up people who need to use MTD for 2026 to 2027 but had not signed up. It is doing this in stages and contacts you afterwards. It uses only the information it already holds, which may be out of date. If HMRC has signed you up, these are its steps.

1. 1Sign in to HMRC online services
2. 2Confirm your income sources, add new ones and tell HMRC about any that have stopped
3. 3Get compatible software
4. 4Catch up your digital records from the start of the tax year
5. 5Send any overdue quarterly update as soon as possible

There are three parts. Digital records stay in your software and are not sent. Quarterly updates send the category totals for each business. The tax return covers the whole year, with adjustments and other income.

You send a quarterly update for each self-employment business and each property business. HMRC receives totals only, never individual receipts or invoices, and you do not make accounting or tax adjustments before you send.

Each update covers the tax year to date. HMRC’s standard periods run from 6 April, and the deadlines are the same if you choose calendar periods from 1 April. Your own deadlines come from HMRC and show in your software and your HMRC online account.

For people who started on 6 April 2026, HMRC lists the first updates as due by 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. The 2026 to 2027 tax return is due by 31 January 2028. The 2025 to 2026 return is still a normal Self Assessment return, due by 31 January 2027.

A fictional plumber also lets a flat. Their 2024 to 2025 return shows £40,000 of plumbing turnover and £15,000 of rent, so their qualifying income is £55,000 and they start MTD on 6 April 2026.

They have two businesses, so they send two quarterly updates each quarter, eight in the year, and one tax return covering both.

No. HMRC says Making Tax Digital will not change the way you pay tax or the dates payments are due. A quarterly update is a summary, not a bill.

Payments on account are two instalments, each half of last year’s tax, due by 31 January and 31 July. You do not make them if last year’s tax was less than £1,000, or if more than 80% of it was paid outside Self Assessment. Any balancing payment is due by 31 January the following year.

After each update you can see an estimate of your tax for the year so far, in your software and your HMRC online account. It is an estimate based on the figures sent so far, not a bill.

MTD brings a points system for late submissions. You get one point for each missed tax return deadline, and for each missed quarterly update deadline in tax years after 2026 to 2027. At 4 points you get a £200 penalty, and another £200 for each further missed deadline. Below the threshold, each point expires 24 months after the missed deadline.

For the 2026 to 2027 tax year there are no penalties for missing a quarterly update deadline. You must still send the updates before you can submit your tax return, and late tax returns and late payments are still penalised.

Late payment penalties work separately and do not apply to payments on account. In your first year on the new penalties, you have 30 days to pay or set up a payment plan before penalties start. After that, the window is 15 days.

The government announced at Budget 2026 on 28 October 2026 that it will not apply late submission penalty points to quarterly updates for the 2027 to 2028 tax year, for people who must start in April 2027. This is not yet in HMRC’s guidance, so check GOV.UK before relying on it.

HMRC does not provide software, so you use a commercial product that works with MTD for Income Tax. HMRC’s software finder lists only products that have been through its recognition process, and HMRC does not recommend any of them.

Some products keep your books for you. Others, sometimes called bridging software, connect to records you already keep, such as a spreadsheet, and make the submissions. You can use more than one product, but only one for each separate submission. A landlord cannot split property updates across two products, for example.

• It covers all your income sources and any other income
• It can send quarterly updates and submit your tax return
• It fits your accounting period
• It works with your agent, if you have one
• What it costs, as free products may limit what you can record

These are the misunderstandings that come up most often. Each one can lead to a missed update or a wrong start date.

If you are unsure about any rule, the GOV.UK pages in the sources below set out the full conditions.

• Checking the threshold on profit instead of turnover
• Waiting for a letter from HMRC before checking
• Thinking quarterly updates are quarterly tax payments
• Forgetting the nil update in a quiet period
• Choosing software that cannot submit your tax return or cover every income source
• Forgetting to add savings, dividends or other income before submitting the tax return

SimpleTaxFlow is MTD for Income Tax software for sole traders and landlords, and it is listed in HMRC’s software finder. It works as bridging software for your spreadsheet, or you can keep simple books in Bookkeeping for free.

You check the figures before each quarterly update, see HMRC’s calculation afterwards, make year-end adjustments and submit your tax return.

You can also add employment, savings, dividends and CIS deductions to your tax return.

Tax rules can change and your circumstances matter. Use HMRC’s current guidance to confirm what applies to you.