Making Tax Digital for Income Tax: What Changes and When

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax (MTD for IT) is HMRC’s programme to move self assessment onto digital rails. Instead of one tax return a year, those in scope will keep digital records and send HMRC quarterly updates from compatible software, followed by a final declaration that replaces the traditional annual return.

It is the biggest change to how the self-employed and landlords report tax since self assessment itself was introduced. The rules are already fixed in law — the only question for most business owners is when they fall into scope and how ready their record-keeping is.

Who is affected, and from when?

The rollout is staged by income level, based on your gross qualifying income from self-employment and property combined — turnover, not profit.

• April 2026 — self-employed individuals and landlords with qualifying income over £50,000 must join
• April 2027 — the threshold drops to £30,000, bringing in a much larger group
• Below those thresholds — no mandatory start date yet, but voluntary sign-up is possible
• Limited companies are not affected — MTD for IT applies to income tax, not corporation tax

HMRC assesses your income from the tax return you have already filed, so many people will be mandated into MTD based on figures from earlier years. If your combined self-employment and rental turnover is anywhere near £50,000, assume you are in the first wave.

What you will actually have to do

Under MTD for IT, three things change. First, your records must be digital — kept in MTD-compatible software or in spreadsheets connected to HMRC through bridging software. Paper ledgers and shoebox receipts no longer satisfy the rules on their own.

Second, you send HMRC a quarterly update summarising your income and expenses for each three-month period. These are running totals, not mini tax returns — but they must be sent on time, four times a year, for each business or property income source you have.

Third, after the tax year ends you complete a final declaration through your software. This is where accounting adjustments, reliefs and other income are brought together, and it replaces the traditional self assessment return for those in scope.

Common worries — and honest answers

• “Will I pay tax quarterly?” — No. Payment dates are unchanged; the quarterly updates are reporting only
• “Can I keep using spreadsheets?” — Yes, if they connect to HMRC via bridging software, though dedicated cloud bookkeeping is usually easier
• “I have a self-employment and a rental — is that one update?” — No, each income source needs its own quarterly updates
• “What if I miss an update?” — HMRC operates a points-based penalty system, so persistent lateness leads to fines

The businesses that struggle with MTD will be the ones that leave preparation to the last minute. The ones that move to cloud bookkeeping early tend to find the quarterly rhythm becomes routine — and they get real-time visibility of profit as a side effect.

How to get ready before April 2026

Start by checking your qualifying income against the thresholds, then get your records into MTD-compatible software well before your start date — running a full year digitally before mandation takes the risk out of the transition.

Bayar Hughes & Co has been guiding clients through HMRC changes since 1991. From our New Eltham office in London SE9, we can confirm when MTD applies to you, set up compatible software, and handle the quarterly updates and final declaration on your behalf. Call +44 7441 347796 to get MTD-ready without the stress.