Making Tax Digital for Income Tax

Under the traditional system a self-employed person or landlord can keep records however they like during the year and then complete a single Self Assessment return. Making Tax Digital for Income Tax (often shortened to MTD) replaces that rhythm with three things:

• keeping business and property records digitally, in software that works with MTD
• sending a short summary of income and expenses to HMRC every quarter
• sending a final tax return straight from the software after the end of the tax year

Quarterly updates are summaries, not tax bills. Your tax is still worked out for the whole year, and payment dates for Self Assessment are not changed by MTD. The practical difference is that records have to be kept up to date through the year rather than pieced together in January.

Whether you are in depends on your qualifying income, which HMRC describes as gross self-employment and property income before any tax allowances or expenses are deducted. Employment income, pensions and savings do not count towards it. This catches people out, because a landlord with large mortgage and repair costs still counts the full rent received, not the profit.

The start date is based on a return you have already sent, as the table shows. HMRC estimates that about 1,077,000 additional people will need to join from April 2027.

Typical people affected include a self-employed electrician whose turnover is already over £50,000, who has been in since April 2026; a couple who own let flats jointly, who each look at their own share of the rent; and a part-time hairdresser who also lets a flat, whose trading and rental income are added together.

Some people are automatically exempt, including those with qualifying income of £20,000 or less, trusts, personal representatives and anyone without a National Insurance number before the start of the tax year. Others can apply as digitally excluded, for example if age, health or disability stops them using a computer, tablet or smartphone, or they cannot get internet access at home or at their business because of their location. HMRC says it will not accept applications based only on unfamiliarity with software or cost.

HMRC's Making Tax Digital campaign site gives these deadlines for the 2026 to 2027 tax year: 7 August 2026 for the first quarterly update, 7 November 2026 for the second, 7 February 2027 for the third, 7 May 2027 for the fourth, and 31 January 2028 to submit the tax return from MTD software. If you are self-employed with accounts made up to 31 March, your start date is 1 April rather than 6 April.

MTD comes with its own penalty system. Each missed quarterly update or return deadline earns one point, the threshold is 4 points, and reaching it triggers a £200 penalty, with another £200 for each later missed deadline. GOV.UK says there are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year, so points for quarterly updates only apply to later years.

Late payment penalties work differently. For 2026 to 2027, tax paid 16 to 30 days late attracts 3% of the tax owed at day 15, or no penalty if it is your first year, and longer delays add a further 3% at day 30 plus an annual rate of 10% on the outstanding amount.

An accountancy firm's summary of the Budget on 28 October 2026 reports an announcement that people joining in April 2027 would not get penalties for late quarterly updates in 2027 to 2028. That is announced only, is not yet law and has not been confirmed on GOV.UK, so check the current penalties page before relying on it.

Some people will manage MTD on their own quite comfortably. If you already use bookkeeping software, have a single source of income and like to keep on top of paperwork, sending four quarterly summaries is not a huge leap.

Others find the change harder. People who keep records on paper or in a shoebox, landlords with several properties, and those who have always handed everything over in December tend to look for help with choosing software, setting up digital records and filing the quarterly updates. Some prefer an accountant to do every update; others do the quarters themselves and only pay for the year-end return. Either way, you remain legally responsible for your own tax.

If you are a landlord, our page on accountants for landlords covers the property side in more detail, and the self assessment tax returns page explains the annual return that MTD is replacing.

MTD changes the work an accountant does through the year, so be specific about what you are buying:

• Will you file all four quarterly updates and the final return, or only some of them?
• Which software do you use, and who pays for the licence?
• Do I send you records monthly, quarterly or in real time through shared software?
• How will the fee change when MTD starts for me?
• Are you registered with HMRC or a professional body for anti-money laundering supervision, as every accountancy service provider has to be?
• Who will do the work day to day, and who handles HMRC letters?

Get the scope and fees in writing before you agree.

Expect MTD support to be priced as an addition to Self Assessment work. A TaxCalc survey reported in MoneyWeek in February 2026 found that 47% of accountants planned to increase prices for MTD clients. See our guide to accountant costs for more.