If you run your own business or rent out property in the UK, a big change to how you report your income is on the way. It is called Making Tax Digital for Income Tax, often shortened to MTD ITSA (Income Tax Self Assessment). From 6 April 2026, many sole traders and landlords will need to keep digital records and send updates to HMRC more often. This guide explains what it is, who it affects, and the simple steps to get ready in plain English.

This article is general information only and is not financial advice. Tax rules can change, so always confirm the details that apply to you on GOV.UK or speak to a qualified accountant.

What is Making Tax Digital for Income Tax?

Making Tax Digital is a government plan to move tax reporting online. For income tax, it means you will no longer rely on one yearly Self Assessment tax return done from memory or a shoebox of receipts. Instead, you keep your records digitally and send HMRC regular updates using approved software.

The goal is to make tax records more accurate and to spread the admin across the year, rather than facing a stressful rush every January. In short, it changes how you report, not the tax you owe.

Who does MTD ITSA affect?

MTD for Income Tax applies to self-employed people and landlords, based on a figure HMRC calls your "qualifying income". This is your total gross income from self-employment and property, before expenses are taken off.

The rules are being introduced in stages, based on income thresholds:

  • From 6 April 2026: sole traders and landlords with qualifying income over £50,000 must follow the rules.
  • From April 2027: those with qualifying income over £30,000 are brought in.
  • Further stages for lower income levels have been discussed, but the exact timing and thresholds should be checked on GOV.UK, as they may change.

If your income is below these levels, you can carry on with the normal Self Assessment process for now. You can also choose to join early and sign up voluntarily.

The tax you owe is not changing. What is changing is the way you keep records and how often you tell HMRC about your income.

Keeping digital records

Under MTD, you must keep digital tax records of your business income and expenses. A paper notebook or a pile of receipts on its own will no longer meet the rules.

In practice, this means recording each transaction using software, such as:

  • Dedicated accounting or bookkeeping software.
  • A simple app that logs income and expenses as they happen.
  • Spreadsheets used together with "bridging software" that connects them to HMRC.

The key point is that your records must be stored digitally and able to link directly to HMRC. You should keep these records up to date through the year, not scramble to enter everything at the last minute.

Quarterly updates and the year-end

One of the biggest changes is how often you report. Instead of a single annual return, you will send quarterly updates to HMRC. That means a short summary of your income and expenses four times a year.

After the four quarters, you complete a final step to confirm your figures, claim any reliefs or allowances, and settle your tax for the year. Think of the quarterly updates as regular check-ins, with one final tidy-up at the end. The exact submission dates are set out on GOV.UK, so it is worth noting them in your calendar early.

Compatible software

To take part, you need compatible software that can keep your digital records and send updates to HMRC. HMRC publishes a list of approved products on GOV.UK, ranging from free and low-cost options to fuller accounting packages.

When choosing, it can help to think about:

  1. Cost: some tools are free for simple needs; others charge a monthly fee.
  2. Ease of use: pick something that suits how confident you feel with technology.
  3. Features: consider invoicing, bank links, and mobile apps if those matter to you.
  4. Compatibility: always check it appears on HMRC's approved list before you buy.

Key dates and deadlines

Here are the headline dates to keep in mind:

  • 6 April 2026: MTD for Income Tax begins for those with qualifying income over £50,000.
  • April 2027: the threshold drops to bring in income over £30,000.
  • Quarterly update deadlines: set throughout the tax year — check the current dates on GOV.UK.

This is part of a wider set of shifts arriving over the next couple of years. It is worth reading up on the broader tax changes coming in 2026/27 so nothing catches you out.

Penalties and points

HMRC uses a points-based system for late submissions. In simple terms, each time you miss a deadline you may receive a penalty point. Once your points reach a set threshold, a financial penalty can follow. Separate charges can also apply to tax paid late.

The exact number of points, thresholds and amounts can change, so confirm the current rules on GOV.UK. The safest approach is simple: keep your records current and submit on time, every time.

Your practical MTD checklist

Use this short checklist to get ready before April 2026:

  1. Work out your qualifying income to see if and when the rules apply to you.
  2. Choose compatible software from HMRC's approved list on GOV.UK.
  3. Start keeping digital records of income and expenses now, so it becomes a habit.
  4. Note the quarterly update deadlines in your calendar.
  5. Set aside a little time each month for bookkeeping, rather than a yearly rush.
  6. If you are unsure, speak to an accountant or bookkeeper early.

Staying organised is also good business sense more widely. The same care that keeps your tax tidy will help you meet the other rules small firms must follow in 2026 too.

Frequently asked questions

Do I need MTD for Income Tax if I earn under £50,000?

Not from April 2026. The first stage applies to qualifying income over £50,000, with a £30,000 threshold from April 2027. Lower thresholds may follow, so check GOV.UK for the latest position. You can also join voluntarily if you wish.

Can I still use a spreadsheet?

Yes, but only if you connect it to HMRC using "bridging software" so your figures can be submitted digitally. A standalone spreadsheet that is not linked to HMRC will not meet the MTD requirements on its own.

How often will I report to HMRC?

You will send four quarterly updates during the tax year, followed by a final step to confirm your figures and settle your tax. The exact deadlines are published on GOV.UK.

Getting ahead of these changes now means less stress later. For regular, plain-English updates on tax and compliance for UK small businesses, sign up to our newsletter.