Making Tax Digital for Income Tax: Who It Applies To and When

Last updated 12 June 2026

What is Making Tax Digital for Income Tax?

MTD for Income Tax is HMRC's replacement for the once-a-year Self Assessment routine for sole traders and landlords. You keep digital records of business income and expenses in software as you go, send HMRC a summary update each quarter, and finalise everything in a tax return after the year ends.

It follows MTD for VAT, which already requires all VAT-registered businesses to keep digital records and file through software (approaching the threshold? See our VAT registration guide). MTD for Income Tax applies to individuals registered for Self Assessment with income from self-employment, property, or both.

Who has to use MTD for Income Tax, and from when?

Mandation arrives in three waves based on qualifying income, and each wave is tested on a tax return you have already filed — or are about to file. From 6 April 2026 it applies if your 2024/25 qualifying income was over £50,000; from 6 April 2027 the test drops to over £30,000; and from 6 April 2028 it reaches over £20,000 (gov.uk).

HMRC reviews your Self Assessment return each year and writes to people who have crossed a threshold before their start date — but the responsibility to comply sits with you whether or not a letter arrives. An exemption is available if you cannot reasonably use software (for example, digital exclusion); you must apply to HMRC for it. Our MTD qualifying income checker tells you in seconds which wave, if any, catches you.

What counts as qualifying income?

Qualifying income is your gross income from self-employment and property added together — turnover before deducting a single expense. A landlord with £26,000 of rent and a sole trader profit of £18,000 on £31,000 of takings has qualifying income of £57,000, not £44,000, and is in the first wave even though their taxable profit is far lower.

Three points trip people up:

• It is gross, not profit. Expenses and the £1,000 trading allowance are irrelevant to the test. Delivery and rideshare drivers should count gross fares before platform costs — our Uber and Deliveroo calculators show the gap between gross income and taxable profit.
• Sources are combined. A side business and a rental property are added together, so two modest income streams can cross a threshold that neither would alone.
• Employment income does not count. Salary, pensions and dividends are outside the test — only self-employment and property income matter.

How do the cumulative quarterly updates work?

Each quarterly update covers the period from the start of the tax year to the end of that quarter — not just the latest three months. Updates are summaries of totals for each income and expense category, sent from your software, with standard deadlines of 7 August, 7 November, 7 February and 7 May (gov.uk).

The cumulative design is genuinely helpful: if you misposted an expense in Q1, you fix the record and the corrected year-to-date totals flow through your next update — no need to resend earlier quarters. If you spot an error after the final quarter, you can resend the fourth update. You can also elect calendar quarters (1 April to 31 March) if that matches your bookkeeping; the deadlines stay the same. Our quarterly deadline calculator maps every date for your start year.

Updates are running totals only — adjustments, reliefs and allowances are dealt with once, when you finalise your tax return. Getting expense categories right from day one still pays off: our allowable expenses guide covers what you can claim.

Do you still file a tax return and pay on the same dates?

Yes. After the fourth quarterly update you finalise your position through software — adding other income such as employment, dividends or savings interest — and submit a tax return by 31 January. For 2026/27, the first mandated year, that means 31 January 2028.

Crucially, MTD does not change how much tax you pay or when. The £12,570 Personal Allowance, Income Tax rates, Class 4 National Insurance and the 31 January / 31 July payments on account all work as before. Estimate the bill with our sole trader tax calculator; if you are new to self-employment, start with registering as a sole trader.

What software do you need — and is there a free option?

You need software HMRC recognises as MTD-compatible. There are two routes: full record-keeping software that creates and stores your digital records (bank feeds, receipt scanning or manual entry), or bridging software that connects spreadsheets you already keep to HMRC's systems — spreadsheet users are not forced to abandon them.

One persistent myth is worth killing: HMRC is not releasing its own free MTD software. Gov.uk is explicit that all products come from commercial providers and HMRC recommends none of them. Free commercial products do exist for people with simple tax affairs, usually with limits on use. Check a product covers everything you need — quarterly updates and the final tax return — via HMRC's software finder on gov.uk.

Sources: Use Making Tax Digital for Income Tax, Check if you're eligible and Find compatible software (gov.uk), verified 12 June 2026. Estimates for information only — not regulated tax advice.