HMRC is rolling out a major change to the way certain individuals report their income. If you’re a self-employed individual or a landlord, you may receive a letter from HMRC in the coming weeks about Making Tax Digital for Income Tax (MTD IT). This new scheme is part of the government’s efforts to reduce tax errors and modernise the tax system.
In this article, we’ll walk you through what MTD IT means, who it affects, and how to prepare; plus answers to common questions.
What is MTD for Income Tax?
MTD IT is an HMRC initiative that requires certain individuals to keep digital records and submit quarterly tax updates using compatible software. The goal is to reduce errors and improve compliance across the board.
This scheme is being rolled out in stages:
- From 6 April 2026—MTD IT becomes mandatory for individuals earning over £50,000 from self-employment or property.
- From 6 April 2027—Those earning between £30,000 and £50,000 from these sources will also need to comply.
- From April 2028—Individuals earning over £20,000 may be brought into scope in future phases.
If your income is below £30,000, you are not currently required to comply, but HMRC may extend the scheme further down the line.
If your situation is a bit different, check out our other guides on Making Tax Digital (MTD):
Who is affected by MTD IT?
You’ll be affected by Making Tax Digital for income tax if:
- You earn self-employment income, rental income, or both.
- Your gross income (before expenses) exceeds £50,000 in the 2024/25 tax year – compliance starts April 2026.
- Your income exceeds £30,000 in the 2025/26 tax year – compliance starts April 2027.
Note: The income thresholds apply to your combined income from all sole trades and UK property, not per source.
What’s changing?
| Aspect | Current Self Assessment | MTD for Income Tax |
| Filing frequency | One annual tax return | 4 quarterly returns + 1 annual statement |
| Record keeping | Manual or digital | Must use MTD-compatible software |
| Deadlines | 31 Jan following tax year | Quarterly deadlines + final statement |
| Penalties | Flat rate fines | Points-based system with £200 fines |
Quarterly submission schedule for MTD IT
You’ll need to submit four digital updates per year:
- 6 Apr – 5 Jul → Due by 7 Aug
- 6 Jul – 5 Oct → Due by 7 Nov
- 6 Oct – 5 Jan → Due by 7 Feb
- 6 Jan – 5 Apr → Due by 7 May
An annual final declaration will still be due by 31 January following the end of the tax year.
What counts as qualifying income for MTD IT?
Only self-employment and UK property income count toward the MTD IT threshold. The following sources are excluded:
- Employment (PAYE)
- Dividends
- Partnership income
- Pensions
- Savings interest
If you have multiple businesses or properties, HMRC combines the income to assess the threshold. Each stream must then be reported separately in your software.
Software requirements
To comply with MTD IT, you must use HMRC-approved software to:
- Keep digital records
- Submit quarterly returns
- Send your final declaration
HMRC does not provide free software, but you can view a list of approved MTD IT software providers here.
Are there any exemptions for MTD IT?
Yes, exemptions may apply for:
- Age or disability-related barriers
- Remote locations with poor internet access
- Religious beliefs
- Trustees, personal representatives of deceased persons, and certain non-residents
You can apply for an exemption through HMRC if you qualify.
What if I don’t comply with MTD IT?
HMRC is introducing a points-based penalty system:
- 1 penalty point for each missed quarterly return
- 4 points triggers a £200 fine
- Points reset after a year of full compliance and all past submissions made
How to prepare for MTD IT
If you think you might be affected:
- Start keeping digital records now
- Consider switching to MTD-compatible software early
- Speak to a tax adviser to review your reporting needs
If you receive a letter from HMRC and your income is close to £50,000, don’t panic. You don’t need to do anything right away; our team will be in touch to support you through the changes.
Need help with MTD IT?
We’re here to help you stay compliant. Our tax experts can guide you through the MTD IT transition, recommend software, and ensure your records are accurate; leaving you free to focus on running your business.
Get in touch today to speak to our team.
Need expert help with MTD IT filing in UK? Get in touch.
About Toby Denwood
Toby Denwood is a UK tax advisor specialising in self-assessment for sole traders, R&D tax relief, and EIS/SEIS for startups. He helps business owners stay compliant, save time, and claim valuable tax incentives. Toby combines deep HMRC expertise with clear, practical advice that gets results.
FAQs about Making Tax Digital (MTD) for Income Tax (IT)
Do I still need to file a tax return when MTD IT is active?
Yes. You must still submit an end-of-year final declaration by 31 January, even with quarterly updates.
Can I use spreadsheets for MTD IT?
Only if they’re linked to MTD-compatible software that can submit updates directly to HMRC.
What if I have a tax agent?
They can file on your behalf using compatible software.
What should I do to get ready for MTD IT?
You don’t need to wait until July 2026 to get started. Voluntarily adopting MTD IT early can help ensure you’re filing correctly and compliantly from day one;giving you time to get familiar with the software, fix any record-keeping issues, and avoid stress closer to the deadline.
How to migrate from current tax software to MTD-compliant software
Start by checking whether your current software is MTD-compatible. If it’s not, you’ll need to switch to one that is recognised by HMRC.
Most modern accounting tools offer a straightforward migration process, including data import options from older systems or spreadsheets.
Just make sure all your records are accurate and up to date before moving over. And don’t worry—your accountant (or Sleek!) can guide you through the switch if needed.
How does MTD for IT affect people with multiple income streams?
If you earn money from more than one source, like freelancing and rental income, then you’ll need to report each stream separately under MTD for Income Tax.
Your MTD-compliant software should let you tag and track different types of income, so they’re correctly categorised. Keep clear records for each source and make sure your updates reflect the full picture.
How often do I need to submit updates under MTD?
You’ll need to send quarterly updates to HMRC, plus a final declaration at the end of the tax year. These updates summarise your income and expenses and help HMRC estimate your tax liability. It’s a shift from once-a-year tax returns — but with the right tools, it becomes part of your routine.
