Making Tax Digital (MTD) Explained

Introduction

Making Tax Digital (MTD) for Income Tax changes how sole traders and landlords report income and expenses to HMRC. If your qualifying income was more than £50,000 in 2024/25, you must follow MTD from 6 April 2026. If your qualifying income was lower, you can still sign up voluntarily.

This guide is for sole traders and landlords who joined the first wave of MTD for Income Tax, whether because they by law are required to, or because they chose to get started early.

To make it easier to understand what you need to do and when, we have mapped out the first phase of MTD for Income Tax, from April 2026 to your first final declaration before the end of January 2028. It will take a little more than a year to settle in, but we are here to help you through it.

We will guide you through the deadlines for this first period and explain how MTD fits with the Self-Assessment process you have used before. To help you see how it will work in practice, we can also provide a list of MTD-compatible, HMRC-recognised software.

If you have more than one income stream, such as being a sole trader and renting out property, you will need to submit quarterly updates and an end-of-year update for each one, plus a single final declaration covering all your income. In practice, which means you will need to complete most of these steps twice

If your qualifying income for 2024/25 was more than £50,000, you must sign up for MTD for Income Tax before 6 April 2026 and begin keeping digital business records from that date.

Step 1: Manually register for MTD for Income Tax on your HMRC account.

HMRC will not register you automatically, so find your Government Gateway login detail and complete the online registration process.

Note: MTD for Income Tax is mandatory, and penalties apply if you do not comply or keep digital records. You can only opt out if you meet the strict exemption criteria. If you think you may qualify for an exemption, for example because you cannot use the internet, you must apply to HMRC before your MTD for Income Tax start date.

Step 2: Ensure you have MTD-compatible software to keep your digital records.

You can check HMRC’s list of recognised software here.

Step 3: Connect MTD-compatible software to your HMRC account.

This is another step you will need to complete manually. In most software, you can do this through the ‘Connections and Add-Ons’ menu, different software may call this by another name.

Before 6th April 2026: Register for MTD for Income Tax with HMRC and sort out your software.

6th April 2026: MTD for Income Tax record-keeping starts.

This is the date when anyone with qualifying income over £50,000 must begin keeping records under MTD for Income Tax. You will need to use HMRC-recognised, MTD-compatible software to maintain fully digital records, submit quarterly updates during the year, and file a final declaration after the tax year ends.

Time-saving tip: Self-Assessment filing for 2025/26 opens on 6 April 2026. To avoid extra admin while you are also starting with MTD, file your Self-Assessment as soon as you can after that date. If you submit it before your MTD quarterly updates begin in August 2026, you will avoid having both obligations overlapping and have one less thing to think about.

Note: The periods covered by your quarterly updates will automatically default to the HMRC tax quarters (e.g. 6th April to 5th July due 7th August 6th July to 5th October due 7th November 6th October to 5th January due 7th February 6th January to 5th April due 7th May). But you can choose to switch to calendar quarters instead if that better suits your bookkeeping calendar.

7th August 2026: Deadline (6th April to 5th July) to send your first quarterly update.

Quarterly updates are a notable change, in the way you pay your income tax and national insurance, sole traders and landlords are concerned about the extra admin involved. For each update, you will need to send HMRC your income and expenses for the previous three months, this means the work in spread out over the year.

Note: You will not be required to pay any tax when you submit your quarterly updates. The annual payment deadlines for income tax and Class 4 National Insurance remain 31st January and 31st July.

Year One.

HMRC has confirmed that sole traders and landlords required to start using MTD for Income Tax in April 2026 will not be penalised for submitting their first four quarterly updates late. Penalties will apply after that, so it is still worth getting into the habit of meeting the deadlines from the start.

Although quarterly updates may feel like extra work at first, they should make your year-end tax return easier by helping you stay on top of your records throughout the year. As Craig Ogilvie, HMRC’s Director of Making Tax Digital, puts it: “Don’t see it as more work,” he urges. “You’re doing your tax in bite-sized chunks. You still complete a tax return at the end of the year, but it will be easier than it was before. So, think of it as doing the work through the year so you’ve got less to do at the end of the year.”

7th November 2026: Deadline (6th July to 5th October) to send your second MTD for Income Tax quarterly update.

By now, you should feel more confident about the process - just check your figures and submit your update.

If you missed something or made a mistake in your first quarterly update, you can correct it afterwards and the changes you make will be included in your second quarterly update.

Note: As in quarter one/two, if you missed something or made a mistake you can corrected in the next quarter.

31st January 2027: Deadline to file your Self-Assessment tax return for 2025/26 and pay any tax due.

Even if you are using MTD for Income Tax for 2026-2027, you will still need to file a Self-Assessment return for the 2025/26 tax year. The good news is that it will be your last one.

Note: 31st January 2027 is also the deadline for your first payment on account for the 2026/27 tax year.

7th February 2027: Deadline (6th October to 5th January) to send your third MTD for Income Tax quarterly update.

Get those figures checked and send your quarterly update, as before.

7th May 2027: Deadline (6th January to 5th April) to send your fourth MTD for Income Tax quarterly update.

By this point, submitting your quarterly updates should feel much more straightforward.

31st July 2027: Deadline to pay your second payment on account for 2026/27 tax year.

Do not forget your payments on account for 2026/27 - this is the final deadline for your second payment.

Year Two.

You are now starting year two of your quarterly update submissions for MTD for Income Tax.

Remember: late-submission penalties now apply to quarterly updates. Only your first four MTD for Income Tax quarterly updates, starting from April 2026, were exempt from these penalties.

7th August 2027: Deadline (6th April to 5th July) to send your first MTD for Income Tax quarterly update for 2027/28.

7th November 2027: Deadline (6th July to 5th October) to send your second quarterly update for 2027/28.

This is your second quarterly update in year two of MTD for Income Tax and National Insurance. Remember, any corrections to errors or omissions in earlier quarterly updates will be passed to HMRC when you submit each new one.

31st January 2028: Deadline to submit your MTD for Income Tax end-of-year update and final declaration and pay your tax and national insurance for 2026/27.

You will need to submit an end-of-year update for each income stream, including adjustments such as capital allowances and any goods taken for personal use. You will then submit a final declaration showing your total figures for the 2026/27 tax year, this is like a Self-Assessment tax return in previous years.

Before completing your final declaration, make sure your digital records and quarterly updates are accurate and up to date. The final declaration must include all your taxable income, such as savings interest and dividend payments.

If you make a mistake in your final declaration, do not worry - you can submit an amended version once you spot the error. You must tell HMRC about any corrections within 12 months of the filing deadline. If errors in your final declaration that you send are not corrected, you may face penalties.

You may also face penalties for paying tax or National Insurance (NI) late. As with Self-Assessment, the deadline to pay your MTD for Income Tax bill is 31 January, and any payments on account are due by 31 July.

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