Use Making Tax Digital for Income Tax

Making Tax Digital for Income Tax changes how sole traders and landlords report to HMRC. You keep digital records of your self-employment and property income and expenses, send HMRC a summary every three months, and submit your tax return, all through compatible software.

Check whether you must use it

You must use Making Tax Digital for Income Tax if you are a sole trader or landlord registered for Self Assessment, you have income from self-employment or property, and your qualifying income is above the threshold for your start date. The thresholds are set by tax year.

Qualifying income is your total income from self-employment and property before expenses, taken from your Self Assessment return for the qualifying year in the list above. Add every self-employment and property source together. If you earn £25,000 from rent and £27,000 from self-employment, your qualifying income is £52,000. Employment income, dividends, pensions and your share of profit from a partnership do not count. Income from a jointly owned property counts at your share.

HMRC checks your return each year and writes to you if you are over the threshold, but the duty to check is yours whether or not a letter arrives. If you have not signed up and need to use the service for 2026 to 2027, HMRC began signing you up itself from September 2026, using only the information it holds. Limited companies are not covered, and partnerships will join on a timetable HMRC has yet to set.

Check for an exemption

You are exempt automatically if your qualifying income does not exceed the lowest threshold in the list above, or if you do not have a National Insurance number before the start of the tax year. Some people are exempt for 2026 to 2027 only, such as those who claimed averaging relief or qualifying care relief, and some groups are exempt on a longer basis.

If you are digitally excluded, you can apply for an exemption. That means it is not reasonable for you to use compatible software because of your age, health or disability, religious beliefs, or because you cannot get internet access at your home or business. Being unfamiliar with software, having a small number of records or having filed on paper before is not enough. An exempt person still files a Self Assessment return as normal.

Choose software and sign up

HMRC does not provide software. You need commercial software that works with Making Tax Digital for Income Tax.

Check that the product supports all your income sources, works with your accounting period and, if you are VAT-registered, meets your VAT needs.

To sign up you must be registered for Self Assessment and have submitted a tax return in the last two years. You sign up online with your Self Assessment user ID, or your agent signs you up, and then authorise your software. You can sign up voluntarily before you are required to.

Keep digital records

Record your self-employment and property income and expenses in your software. You must still keep the original documents behind them, such as invoices and bank statements. If you use more than one product, the records must pass between them through digital links, such as linked spreadsheet cells, file import and export or an API. Once a record has been sent in a quarterly update, you must not copy it by hand or cut and paste it into other software. You do not need digital records of other income, such as dividends or savings interest.

Send quarterly updates

A quarterly update is a summary of your income and expenses for each business, not a tax return. Your software works it out for you to check. HMRC does not receive individual invoices or receipts.

You can send an update up to 10 days before a period ends if you expect no further transactions.

Submit your tax return and pay

After the year ends, make any adjustments, add your other income and gains, check what HMRC has added for you, such as PAYE income and pensions, and submit your tax return through your software by 31 January. You pay any tax due by the same date. You still file a Self Assessment return in the usual way for the year before your first Making Tax Digital year.

Avoid penalties

The new penalties replace the late filing and late payment penalties for your personal return from the tax year you join. Once you reach four points, the penalty applies again each time you miss a deadline. Your VAT penalty points are separate.

You have 30 days after the due date in your first year of the new penalties, and 15 days in later years, to pay in full or set up a payment plan before late payment penalties begin. A payment 16 to 30 days late carries a penalty of 3% of the tax owed at day 15 for 2026 to 2027, or 4% for 2027 to 2028, but none in your first year. After 30 days you add the same percentage again, plus a charge of 10% a year on the unpaid tax, applied daily. Interest runs from the first day a payment is late.

If you cannot pay, contact HMRC before the deadline: a payment plan that HMRC agrees and you keep to pauses the penalties.

Know when you can leave

You can opt out if you amend your previous return so that your qualifying income falls below the threshold, or if it has been below the threshold for three tax years in a row. HMRC uses your fourth quarterly update in the third year to check.

Keep MTD for VAT separate

Every VAT-registered business already keeps VAT records and files returns using compatible software. That requirement is separate from Making Tax Digital for Income Tax, so check that any software you use for VAT also supports your income reporting.