What is Making Tax Digital for Income Tax?

What Making Tax Digital is

Making Tax Digital (MTD) for Income Tax changes how some sole traders and landlords report their income to HMRC. Instead of only sending one tax return a year, you:

• keep digital records of your business or property income and expenses
• send HMRC a short update every quarter (every 3 months)
• send your tax return through the same software by 31 January after the tax year ends

You do all of this using software that works with MTD. HMRC does not provide this software, so you choose your own.

Who it is for

You must use MTD for Income Tax if all of these apply:

• you are a sole trader or landlord registered for Self Assessment
• you get income from self-employment, property, or both
• your qualifying income is over the threshold for that year

When it applies to you

HMRC looks at the Self Assessment return for an earlier tax year to decide if you must join.

What counts as qualifying income

Qualifying income is your total income from self-employment and property before expenses (your turnover).

Example: you get £25,000 in rent and £27,000 from self-employment. Your qualifying income is £52,000 (£25,000 plus £27,000). That is over £50,000, even if your profit is much lower.

These do not count: wages taxed through PAYE, your share of profit as a partner in a partnership, dividends (including from your own company), and State or private pensions.

Quarterly update deadlines for 2026/27

Penalties

There are no penalties for missing a quarterly update deadline in 2026/27. After that, you get a point each time you miss a deadline. At 4 points you get a £200 penalty, and another £200 for each later missed deadline. Penalties still apply in 2026/27 for a late tax return or late payment.

How to get started

1. Work out your qualifying income.
2. Check if and when you need to use MTD.
3. Choose compatible software.
4. Sign up for MTD for Income Tax on GOV.UK. You need to be registered for Self Assessment and have sent a tax return in the last 2 years.
5. Keep digital records and send your updates.

Exemptions

You may be exempt, for example if you are digitally excluded. If you are exempt, you must still send a Self Assessment tax return.

Related guides

• What are the Self Assessment deadlines?
• When do I need to register for Self Assessment?
• Do I pay tax on a side hustle?
• What is the trading allowance?
• What is the penalty for filing a Self Assessment tax return late?

Where this comes from

• Check if you're eligible for Making Tax Digital for Income Tax (GOV.UK)
• Making Tax Digital for Income Tax: step by step (GOV.UK)
• Work out your qualifying income (GOV.UK)
• Sign up for Making Tax Digital for Income Tax (GOV.UK)
• Penalties for Making Tax Digital for Income Tax (GOV.UK)