What Making Tax Digital for Income Tax means for you

If you're self-employed or a landlord, your tax obligations and the way you manage them has changed significantly.

From 6 April 2026, Making Tax Digital (MTD) for Income Tax became a legal requirement for individuals with qualifying income over £50,000.

MTD for Income Tax is a government initiative to modernise the UK tax system.

In fact, it's the biggest change since Self Assessment was introduced more than 30 years ago, and it marks a move towards more accurate, timely and digital record-keeping.

While any change can feel daunting, there's plenty of guidance to support your London small business – continue reading to learn more from the experts at HMRC on how to adapt to this new way of managing your tax.

What is Making Tax Digital for Income Tax?

Under MTD for Income Tax, self-employed individuals and landlords are required to use MTD compatible software to:

• Create and store digital records of their self-employment and property income and expenses.

• Send quarterly updates to HMRC.

• Submit their tax return by 31 January following the end of the tax year.

This brings tax reporting closer to real time.

Who needs to use MTD for Income Tax – and when?

From 6 April 2026, individuals with qualifying income over £50,000 are legally required to use MTD.

The income threshold will reduce over the coming years:

• 6 April 2027 – qualifying income above £30,000.

• 6 April 2028 – qualifying income above £20,000.

This phased approach gives you time to prepare and familiarise yourself with digital record keeping before joining the service.

Find out if and when you need to use Making Tax Digital for Income Tax.

What is "MTD compatible software"?

MTD compatible software is designed to be accessible and intuitive.

HMRC has worked with the software industry to ensure a range of free and low-cost options are available, alongside a wider choice of products to suit different needs and budgets.

Commercial software providers offer a broad range of solutions to meet the varying requirements of businesses and landlords.

You can also use the software finder tool to:

• Find compatible software that meets your needs.

• Check whether your existing software works with MTD for Income Tax.

MTD for Income Tax will help sole traders and landlords stay on top of their tax affairs by using compatible software to keep digital records up to date and to send quarterly updates of income and expenses to HMRC in real time.

Businesses that already use software for Making Tax Digital for VAT have reported benefits such as time savings, increased confidence in their tax affairs, greater accuracy and improved business operations, compared with manual processes.

To meet MTD requirements, your software must be compatible with HMRC systems.

Not all accounting or record‑keeping software works with MTD automatically, so you may need to:

• Upgrade to a version of software that works with MTD.

• Switch to a different software provider.

• Use bridging software to connect spreadsheets to HMRC.

Check whether your current software is compatible by visiting the official HMRC list.

What are quarterly updates?

A quarterly update under MTD for Income Tax is a summary of income and expenses sent to HMRC every three months using MTD-compatible software.

Every three months, the software pulls together your digital records for each business you have and creates totals for each income and expense category. These updates are submitted directly to HMRC through your chosen software.

If records are kept up to date, sending a quarterly update should simply be a matter of checking the figures and submitting them.

You do not need to make any accounting or tax adjustments before sending a quarterly update.

You still submit one tax return at the end of the year. When completing your tax return, information from your quarterly updates will already be pre‑populated, helping to save time.

Quarterly updates give HMRC a more regular view of business activity and help support forward planning, better cash flow management and a clearer understanding of emerging tax liabilities.

This helps businesses prepare more effectively for their tax payments.

Read more about how and when to send quarterly updates and what's included.

The benefits of MTD for Income Tax

Keeping digital records and providing regular updates reduces the chance of common mistakes.

This means less time spent managing your tax affairs – and more time focusing on running and growing your business.

MTD for Income Tax also gives you greater visibility over your finances by using MTD compatible software, you can:

• See an in-year estimate of how much tax you owe.

• Understand your cash flow as the year progresses.

• Plan ahead and make more informed financial decisions.

• Reduce the risk of under‑ or over‑paying tax.

If you notice an error in your quarterly update, you should correct the relevant entry as soon as you become aware of an error or omission.

After the tax return has been submitted, any changes must be made via amending the return.

How to get ready for MTD for Income Tax

If you receive income from self-employment and/or property, there are some simple steps you can take to prepare:

1. Check if and when you need to use MTD: confirm whether MTD applies to you and identify your start date, based on your qualifying income.

2. Speak to your agent: if you use an accountant or tax agent, check that they are prepared for MTD and can access compatible software.

3. Choose appropriate software: HMRC does not provide software, but you're free to choose from a range of compatible options – including free software for individuals with simple affairs.

4. Start keeping digital records: begin using your chosen software to record income and expenses.

5. Check key dates: review MTD for Income Tax key milestones sole traders and landlords need to meet, including when digital record-keeping must start from April 2026 and when quarterly updates and tax returns are due.

Further guidance and support

You can visit HMRC's step-by-step guides here:

• Making Tax Digital for Income Tax for sole traders and landlords: step by step – GOV.UK

• Making Tax Digital for Income Tax as an agent: step by step – GOV.UK

By adopting digital tools, keeping accurate records and making use of the guidance and support available, you and your business are better placed to take control of your tax obligations.

MTD for Income Tax enables you to work more efficiently, reduce errors, plan ahead with greater confidence and benefit from a tax system designed to be clearer, quicker and easier to use for self-employed founders.

There is a wide range of support available to help you prepare:

• Visit Making Tax Digital for Income Tax for guidance on how MTD works, when to start, key dates and benefits.

• Making Tax Digital for Income Tax explained, an overview of your first year and a checklist.

• Attend HMRC webinars or watch helpful videos.

• Download the HMRC app.

• Follow HMRC on social media.

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