Making Tax Digital (MTD) is HM Revenue & Customs’ (HMRC) programme to move UK tax reporting away from paper and annual catch-up bookkeeping towards digital records kept throughout the year. It has applied to VAT since 2019 and to all VAT-registered businesses since April 2022. On 6 April 2026 it reached Income Tax, the biggest change to personal tax reporting since Self Assessment began.
For accountants, MTD is both a compliance obligation for clients and a change in how practices work. This article summarises the current rules for Income Tax and explains what they mean in practice.
Who has to use MTD for Income Tax
MTD for Income Tax applies to sole traders and landlords who are registered for Self Assessment and whose qualifying income exceeds a threshold. Qualifying income is the combined gross income (before expenses or allowances) from self-employment and property, including foreign property. Employment income, pensions and dividends are not counted towards the threshold.
The threshold is being reduced in three stages. Whether a person must join is judged on the qualifying income in their Self Assessment return for an earlier tax year:
| Must use MTD from | If qualifying income exceeded | Based on the tax year |
| 6 April 2026 | £50,000 | 2024–25 |
| 6 April 2027 | £30,000 | 2025–26 |
| 6 April 2028 | £20,000 | 2026–27 |
HMRC writes to people who are within scope, but individuals are still responsible for checking their position and signing up. Agents can sign clients up through GOV.UK. Certain exemptions exist (for example, for people who are digitally excluded), and partnerships are not yet required to join.
What clients in scope must do
A taxpayer within MTD for Income Tax must use HMRC-recognised compatible software to:
- Keep digital records of business and property income and expenses.
- Send quarterly updates summarising income and expenses for each business. These are summaries, not tax returns, and no accounting or tax adjustments are needed at this stage.
- File the tax return through the software by 31 January following the end of the tax year, which is where adjustments, reliefs and other income are brought in.
Quarterly updates for the standard tax-year periods are due as follows:
| Quarter | Period covered | Update due by |
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
The first-ever deadline under the new regime passed on 7 August 2026, and the next falls on 7 November 2026.
Penalties: a soft landing in the first year
MTD for Income Tax comes with a new points-based system for late submissions. Each missed deadline earns a penalty point, and a £200 penalty is charged once the threshold of four points is reached (two points for those who joined voluntarily). For the 2026–27 tax year only, HMRC will not give penalty points for late quarterly updates, but the updates must still be sent before the tax return can be filed. Points do apply to a late tax return, and new late payment penalties apply from 2026–27. From 2027–28, late quarterly updates will also attract points.
How MTD helps accountants
Better quality records. Records kept digitally through the year, rather than reconstructed from paper at year end, mean fewer errors, fewer missing receipts and less time spent on clean-up before the return is prepared.
Less manual work. Bank feeds, receipt capture and automated categorisation in MTD-compatible software reduce data entry and re-keying, freeing staff time for review and advisory work.
A clearer, more regular view of clients. Quarterly updates give accountants up-to-date figures four times a year. That makes it easier to spot problems early, estimate tax liabilities in advance and help clients plan for payments on account.
New and recurring service lines. Clients newly brought into scope need help with eligibility checks, software selection and setup, bookkeeping, quarterly submissions and year-end returns. This turns a once-a-year engagement into a year-round relationship.
Stronger digital skills. Working with MTD software, digital links and HMRC’s agent services builds capabilities that are increasingly expected across the profession.
Practical points for accountants
Practices should review their client base against the thresholds now, particularly for clients whose 2025–26 income will bring them into scope from April 2027. Agents need an HMRC agent services account and the appropriate client authorisation to act for MTD for Income Tax. Software should be chosen from HMRC’s list of recognised products; spreadsheets can still be used if paired with bridging software that submits to HMRC. Above all, clients need to understand that MTD changes their habits as well as their filing: records must be kept as they go, not at the year end.
Conclusion
MTD is now a live requirement for Income Tax, with more sole traders and landlords joining in 2027 and 2028. For accountants, it means more structured, more frequent work with clients, and a chance to move from annual compliance towards ongoing advice. Firms that prepare their clients and processes early will find the transition considerably smoother.
Official sources
- HMRC, Find out if and when you need to use Making Tax Digital for Income Tax: https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax
- HMRC, Self Assessment legal framework manual SALF910: https://www.gov.uk/hmrc-internal-manuals/self-assessment-legal-framework/salf910
- HMRC policy paper, MTD for Income Tax for sole traders and landlords: https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords
Disclaimer: This article provides general information on UK tax rules as understood at the date of review and is not tax or legal advice. Rules and HMRC guidance may change. Readers should refer to GOV.UK or consult a suitably qualified UK tax adviser before acting.
Special Thanks : Ms. Khushi & Ms. Muskan, Team-Kulbhushan & Associates