What is Making Tax Digital for Income Tax?

In short: Making Tax Digital for Income Tax is HMRC's digital reporting system for sole traders and landlords: digital records, four cumulative quarterly updates, and a final declaration instead of the Self Assessment return. It starts from 6 April 2026 for qualifying income over £50,000, then lower thresholds follow (GOV.UK: When you need to use Making Tax Digital for Income Tax).

What is MTD for Income Tax?

MTD for Income Tax is a new way for mandated sole traders and landlords to keep digital records and report income tax information to HMRC. Under Making Tax Digital, records are kept in compatible software or spreadsheets linked through bridging software, quarterly updates are sent during the year, and a final declaration closes the tax year.

HMRC's scope is Income Tax for self-employment and property income, not Corporation Tax. Companies and trusts are outside MTD for Income Tax, and partnerships are not yet mandated.

Who has to use it and from when?

Sole traders and landlords have to use MTD for Income Tax when their combined gross self-employment turnover and gross property income is above the relevant threshold. HMRC says around 780,000 self-employed people and landlords are mandated from April 2026, with a further 970,000 joining from April 2027 (GOV.UK: One year until Making Tax Digital for Income Tax launches).

Qualifying income means gross income before expenses. For a fuller threshold guide, see who has to use MTD for Income Tax.

What changes compared with Self Assessment?

MTD changes the reporting process, because mandated taxpayers send quarterly updates and then a final declaration instead of a Self Assessment return. The quarterly updates are cumulative year-to-date totals, and the final declaration replaces the Self Assessment return for mandated taxpayers.

Tax payment dates do not change. The balancing payment remains due on 31 January after the tax year, and payments on account remain due on 31 January and 31 July. If you want the exact quarterly update dates, see MTD quarterly updates: dates, deadlines and what to send.

What do you have to do?

You have to keep digital records, use MTD-compatible software or bridging software, send four quarterly updates, and submit a final declaration. HMRC publishes a directory of compatible software, says it does not provide filing software itself, and does not recommend individual providers (GOV.UK: Find software for Making Tax Digital for Income Tax).

The quarterly updates contain totals of income and expenses by category for each business, not every transaction. The final declaration is then due by 31 January after the tax year ends.

Does MTD change how much tax you pay?

MTD does not change how much Income Tax you owe, because it is a reporting and timing change rather than a new tax. The same payment deadlines continue to apply, so the main operational change is keeping records digitally and submitting information during the year.

If you miss an MTD deadline, the penalty rules are separate from the tax calculation. See MTD penalties: what happens if you miss a deadline? for the points and late-payment rules.

How can Taxley help with MTD for Income Tax?

Taxley's Making Tax Digital service for sole traders and landlords isn't available yet, so you can't use Taxley to keep MTD records or send quarterly updates today. We're building it to cover digital records, manual entry or CSV import, quarterly updates you review before sending, and the final declaration, for self-employment and UK and foreign property income.

Until it opens, choose a product from HMRC's list of MTD-compatible software. The MTD Income Tax page shows our progress.

Frequently asked questions

Is MTD for Income Tax compulsory?

Yes, if you are a sole trader or landlord and your qualifying income is above the mandated threshold for the relevant year. HMRC assesses this from your tax return.

Does MTD apply to limited companies?

No. MTD for Income Tax applies to sole traders and landlords within scope. Companies are outside it: they pay Corporation Tax, not Income Tax, and file a Company Tax Return instead. Trusts are also outside MTD for Income Tax, and partnerships are not yet mandated.

Do I pay tax quarterly under MTD?

No. MTD adds quarterly reporting, but tax payment deadlines are unchanged: 31 January for the balancing payment and 31 January and 31 July for payments on account.

What software do I need for MTD?

You need MTD-compatible software, or spreadsheets linked through bridging software. HMRC publishes a directory of compatible software, but it does not provide filing software itself and does not recommend individual providers (GOV.UK: Find software for Making Tax Digital for Income Tax).

Does MTD replace the Self Assessment return?

Yes, for mandated taxpayers. The four cumulative quarterly updates and the final declaration replace the Self Assessment return, and the final declaration is due by 31 January after the tax year ends. Tax payment dates stay the same.