What Making Tax Digital for income tax actually changes

If you are a sole trader or a landlord, you will already be used to filing one Self Assessment tax return a year. Making Tax Digital for income tax keeps the tax return's job — working out what you owe — but changes how and when you send information to HMRC. Instead of one annual event, you keep digital records through the year and send a short quarterly update summarising your income and expenses. At the end of the tax year you confirm everything with a final declaration, and that replaces the old return.

The aim is fewer nasty surprises. If you send information every three months, you spot a slow quarter in July rather than in the following January, and your tax bill stops feeling like a bolt from the blue. It does mean more frequent admin, but each task is smaller.

Who needs to join, and when

MTD for income tax applies to sole traders and landlords with what HMRC calls qualifying income — broadly, turnover from self-employment plus gross rental income. The rollout is staggered:

• From April 2026, if your qualifying income is over £50,000.
• From April 2027, if it is over £30,000.
• From April 2028, if it is over £20,000 — though this final stage has been reviewed more than once, so check the current position before you plan around it.

If you are below the threshold for now, you can still volunteer to join early, and some people find that helpful because the first year is a learning curve. Partnerships are expected to follow later, and there are limited exemptions — for example where using digital tools genuinely is not reasonable or practicable. If you think that applies to you, ask HMRC rather than assuming.

What "digital records" really means

You do not need to scan every receipt into a database or abandon your paper diary. The requirement is that your underlying records are kept digitally and that your quarterly updates are sent from compatible software. In practice, most people choose one of these routes:

• Accounting software where you record income and expenses as they happen, often with bank feeds and receipt-scanning apps.
• A spreadsheet for your records, plus bridging software that submits the figures to HMRC.
• A bookkeeper or agent who keeps the records for you and files on your behalf.

What matters is that the figures can be sent digitally and that you have a clear audit trail. Keep your invoices, bank statements and receipts as you do now — digital records replace the shoebox, not the evidence.

Quarterly updates and the final declaration

Each quarterly update covers a three-month period and is due shortly after it ends. For a business with a 5 April year end, the pattern looks like this:

• Quarter to 5 July — update due 7 August.
• Quarter to 5 October — update due 7 November.
• Quarter to 5 January — update due 7 February.
• Quarter to 5 April — update due 7 May.

Then, by 31 January following the end of the tax year, you submit your final declaration. This is where you add anything the quarterly updates did not cover — reliefs, allowances, other income, capital gains — and it is the figure used to calculate your final bill. If you have an accountant, this is the point where their input matters most.

One reassurance: quarterly updates are not tax payments. Paying on account still happens on the usual January and July dates unless HMRC tells you otherwise. Late submission is handled through a points-based system, with a financial penalty once you collect enough points, so the occasional slip is not catastrophic — but a habit of them is expensive.

A realistic first year

Most of the pain sits in the setup, not the routine. Sort out your software before your first quarter ends, link your bank account if the software supports it, and decide how you will record a cash payment from a customer who never wants an invoice. Test the submission process with a quiet quarter so your first real deadline is not also your first attempt at filing.

It also helps to separate business and personal spending properly. A dedicated business account makes quarterly updates almost automatic, and it makes conversations with your accountant shorter and cheaper. If you are a landlord with a handful of properties, check that your chosen software handles property income as well as trading income — some tools do one well and the other grudgingly.

Practical steps to take now

• Work out your qualifying income and confirm which April you join.
• Choose your record-keeping method, and check it is on HMRC's list of compatible software.
• Register for MTD when HMRC invites you — allow a few weeks for confirmation before your first deadline.
• Set calendar reminders for the four update dates plus 31 January.
• Talk to your accountant about who is filing what, so nothing falls between you.

None of this is designed to catch you out. It is a change of rhythm rather than a change of rules, and businesses that move to digital records early usually find the whole thing far less dramatic than the headlines suggest.