Making Tax Digital for Income Tax: where things stand in 2026/27

Making Tax Digital for Income Tax (often written MTD for Income Tax) changes how sole traders and landlords keep records and report to HMRC. It does not replace Self Assessment. It works inside it. If you have to use it, you keep digital records of your self-employment and property income and expenses, and send quarterly updates through compatible software. You still submit one tax return a year, using that software, by 31 January following the end of the tax year.

The first group has had to use the service since 6 April 2026. Two further groups, based on lower income thresholds, follow from 6 April 2027 and 6 April 2028. This guide covers where the 2026/27 tax year has reached, who is affected and when, what HMRC is sending to taxpayers, the deadlines, how penalties work, and what to do now.

Where things stand in September 2026

For people who have had to use MTD for Income Tax since 6 April 2026:

• First quarterly update: deadline passed. The update for 6 April to 5 July 2026 (or 1 April to 30 June 2026 if you use calendar update periods) was due by 7 August 2026.
• Next deadline: 7 November 2026. This update covers 6 April to 5 October 2026 (or 1 April to 30 September 2026).
• Remaining 2026/27 deadlines: 7 February 2027 and 7 May 2027.
• 2025/26 tax return and payment: filed through Self Assessment in the usual way and due by 31 January 2027, even if you started MTD in April 2026.
• 2026/27 tax return: your first one submitted through MTD software, due by 31 January 2028.

If you missed the 7 August 2026 deadline, HMRC will not give penalty points for late quarterly updates in the 2026/27 tax year. You still need to send the update, because all quarterly updates must be sent before you can submit your tax return, and GOV.UK asks people to send an overdue update as soon as possible.

GOV.UK says that from September 2026 HMRC will start signing up, in stages over the coming months, people who need to use MTD for Income Tax for 2026/27 but have not signed up. This is covered in the section on letters and contact from HMRC below.

Who has to use it, and from when

You need to use MTD for Income Tax if you are a sole trader or landlord registered for Self Assessment, you get income from self-employment, property or both, and your qualifying income is more than the threshold for the relevant tax year.

• Over £50,000 in the 2024/25 tax year: you should have started using MTD for Income Tax from 6 April 2026. If you have not yet signed up, you can still do so.
• Over £30,000 in the 2025/26 tax year: you will need to use it from 6 April 2027.
• Over £20,000 in the 2026/27 tax year: you will need to use it from 6 April 2028.

The test is whether your qualifying income is more than the threshold. If your qualifying income is £20,000 or less, you are automatically exempt.

What counts as qualifying income

Qualifying income is your total income from self-employment and property before expenses, also known as turnover. HMRC checks it using your Self Assessment tax return for the tax year two years before the one in which you would start. For example, your 2024/25 return decided whether you had to start from 6 April 2026.

• It is income before expenses. A landlord with £55,000 of rent and £30,000 of costs has qualifying income of £55,000, which is over £50,000.
• Self-employment and property income are added together. GOV.UK gives the example of £25,000 of rental income and £27,000 of self-employment income, which gives qualifying income of £52,000.
• Other income does not count. This includes employment income taxed through PAYE, your share of profit from a partnership as an individual partner, dividends (including those from your own company), the State Pension and private pensions. A partnership profit share must still be included in your tax return using your compatible software.
• Accounting periods that are not 12 months. For sole traders, HMRC annualises the income where it has the information, so 6 months of trading is doubled. Landlords need to do this calculation themselves, working out what their property income would be over a full 12 months.

The next groups: April 2027 and April 2028

The government estimates that the £20,000 threshold alone will bring approximately 970,000 additional people into scope from 6 April 2028. HMRC reviews each Self Assessment return and, if your qualifying income is above the relevant threshold, writes to confirm the date from which you need to use MTD for Income Tax. If you do not receive a letter, it is still your responsibility to check whether and when you need to use it.

From 6 April 2027: qualifying income over £30,000 in 2025/26

This group is decided by the 2025/26 tax return, which is due by 31 January 2027. It also includes people who were deferred for 2026/27 because their 2024/25 return claimed averaging relief or qualifying care relief, or included the SA107 (trusts etc) or SA109 (residence and foreign income and gains) pages. They will need to use MTD for Income Tax from the 2027/28 tax year if their qualifying income is above £30,000 in 2025/26.

If this may apply to you, steps to take now:

• Work out your 2025/26 qualifying income (turnover from self-employment and property combined) as you prepare that return.
• If you think you qualify for an exemption, you can apply now.
• Choose compatible software. GOV.UK says to choose your software before you sign up.
• Make sure you are signed up in time for 6 April 2027, either yourself or through an agent.
• Note that the 2026/27 return is still filed through Self Assessment in the usual way, by 31 January 2028, because it is the tax year before you start.
• Note that the relief from penalty points for late quarterly updates applies to the 2026/27 tax year only. From 6 April 2027, each missed quarterly update deadline can earn a penalty point.

From 6 April 2028: qualifying income over £20,000 in 2026/27

This group is decided by income in the 2026/27 tax year, which is the current tax year. The return for that year is due by 31 January 2028. The government published a policy paper on 24 March 2026 confirming that the £20,000 threshold takes effect from 6 April 2028. If you think you are digitally excluded, GOV.UK says to apply from summer 2027 onwards.

No start date or threshold has been set for people with qualifying income of £20,000 or less. In March 2025 the government said it would continue to explore how to bring the benefits of digitalisation to more of the sole traders and landlords with income below £20,000.

Partnerships and other later groups

Partnerships do not currently need to use MTD for Income Tax, and HMRC will set out a timeline for them later. Some people with automatic exemptions that last beyond April 2027 (see below) will also need to use it in future, on a timeline HMRC has not yet announced.

Exemptions

There are two kinds of exemption. Automatic exemptions are given by HMRC based on the information it holds, so you do not need to apply. Other exemptions must be applied for, including the exemption for people who are digitally excluded. If you are exempt, you must still report your income and gains in a Self Assessment tax return as normal.

Automatic exemptions

• Qualifying income of £20,000 or less.
• No National Insurance number before the start of the tax year.
• Trusts submitting an SA900, non-resident companies submitting an SA700, and personal representatives of someone who has died. Trustees and personal representatives may still need to use MTD for their own self-employment or property income.
• A 2024/25 return stating that you are not physically or mentally capable of providing information to HMRC and have either given power of attorney to someone in the UK (currently in place) or have a legally appointed deputy, controller or guardian.
• Until April 2027: a 2024/25 return that claimed averaging relief (as an individual, on the SA103) or qualifying care relief, or included the SA107 (trusts etc) or SA109 (residence and foreign income and gains) pages.
• Beyond April 2027: a 2024/25 return that included the SA102M (minister of religion) or SA103L (Lloyd’s member) pages, or a claim to receive or transfer Married Couple’s Allowance or Blind Person’s Allowance.

If these items were not on your 2024/25 return but you reasonably expect to include them on your 2025/26 or 2026/27 return, you need to apply. GOV.UK says you should not apply without good reason to think you will include them.

Digital exclusion

You can apply for this exemption if it is not reasonable for you to use compatible software. GOV.UK gives these examples:

• your age, health condition or disability stops you from using a computer, tablet or smartphone to keep digital records or send them to HMRC
• you are a practising member of a religious society or order whose beliefs are incompatible with using digital communications or keeping digital records, and you do not use a computer, tablet or smartphone for business or personal use
• your location means you cannot get internet access at home or at your business, and cannot get it at a suitable alternative location

There may be other reasons. HMRC decides each application on its own facts. It will not accept an application if the only reason is that you have filed on paper before, you are unfamiliar with accountancy software, you have few digital records, or using MTD will take extra time or cost. If HMRC has already confirmed that you are digitally excluded for MTD for VAT, you can contact HMRC with your National Insurance number, VAT number and reason, and if your circumstances have not changed HMRC will confirm the Income Tax exemption too.

How and when to apply

• Call or write to HMRC using the Self Assessment: general enquiries contact details. Agents use the Agent Dedicated Line.
• If you are applying because you are digitally excluded: if you need to use MTD from 6 April 2026 or 6 April 2027, you can apply now. If you need to use it from 6 April 2028, apply from summer 2027 onwards.
• If you are already signed up and your circumstances change, apply and keep using MTD while you wait for a decision.
• HMRC confirms its decision by letter. If it refuses, you can appeal in writing up to 30 days after the date on the letter.

Letters and contact from HMRC

What HMRC has already sent

Since autumn 2025, HMRC has written to people whose self-employment and property income on their 2024/25 return was over £50,000, confirming that they need to use MTD for Income Tax in the 2026/27 tax year. HMRC said it would send letters in November 2025 to people who had filed their 2024/25 return by August 2025, and further letters in February and March 2026.

The letter explains that you must use MTD for Income Tax from 6 April 2026, asks you to get compatible software and sign up, and says that from the 2026/27 tax year you will no longer be able to file using HMRC’s current online tax return or on paper. It asks people with an accountant or agent to speak to them and give them a copy. HMRC does not send these letters to agents, so if you are a client of ours and have received one, please send us a copy.

If HMRC has signed you up

GOV.UK says that from September 2026 HMRC will start signing up, in stages over the coming months, anyone who needs to use MTD for Income Tax for 2026/27 and has not signed up. HMRC says it will contact you after it has done so, in your HMRC online services account or by post. GOV.UK guidance sets out the steps to take:

• Step 1: sign in to HMRC online services and check and confirm your income sources, adding any new self-employment or property income and reporting any source that has stopped
• Step 2: get compatible software, which HMRC does not supply
• Step 3: catch up your digital records from the start of the tax year
• Step 4: send any overdue quarterly update as soon as possible

HMRC signs people up using only the information it already holds, which may not reflect changes since your last return. That is why it encourages people to sign up themselves, or through their agent, where they can.

If you are not sure whether HMRC has signed you up, sign in to HMRC online services. A message on screen will confirm it. If you do not see a message, you are not signed up yet and can sign up yourself or ask your agent to do it.

If HMRC has signed you up and you do not think you need to use MTD for Income Tax, contact Self Assessment: general enquiries, and check whether you qualify for an exemption.

If all your self-employment and property income stopped before 6 April 2026, you do not need to use MTD for Income Tax. However, unless you tell HMRC, it will sign you up based on the information it holds. You should contact HMRC and still file your 2025/26 return by 31 January 2027. If the income stopped on or after 6 April 2026, you still need to send a quarterly update covering the period up to the date it stopped, and submit your 2026/27 return using MTD software.

If you think you are in scope but have not heard from HMRC

Not receiving a letter does not remove the requirement. It is your responsibility to check whether and when you need to use MTD for Income Tax, and to make sure you are signed up in time. GOV.UK suggests using its online checking tool, speaking to your tax agent if you have one, or checking with a relative or friend who helps with your tax. If you have received a letter but do not think MTD applies to you, contact HMRC.

Checking that a contact is from HMRC

HMRC’s guidance on scams says a call, email or text could be a scam if it:

• rushes you, or is threatening or unexpected
• asks for personal information such as bank details
• tells you to transfer money
• offers a refund, rebate or grant

HMRC publishes lists of letters, emails, phone calls and texts that it has confirmed are from HMRC. They include:

• The MTD for Income Tax awareness letter. Its QR code takes you to GOV.UK guidance for sole traders and landlords. HMRC says its QR codes usually take you to guidance on GOV.UK, and it will tell you if one takes you anywhere else.
• MTD research. HMRC also lists research agencies that may contact you about MTD on its behalf. Taking part is voluntary.

You can forward suspicious texts to 60599 (network charges apply) and suspicious emails to phishing@hmrc.gov.uk. If you are unsure about a message, you are welcome to check it with us before you respond.

What changes in practice

GOV.UK lists the new tasks as follows.

• Use compatible software. Your software sends your quarterly updates and tax return to HMRC. You must authorise it to connect to HMRC, and renew that authorisation every 18 months. HMRC’s online software finder shows products that have been through its recognition process, and HMRC does not recommend any product. You can use one product for everything or a separate product for each income source, but only one product for each separate submission.
• Create digital records of your self-employment and property income and expenses. A digital record is one created and stored in compatible software. You can still use spreadsheets if they are linked to bridging software, which connects a spreadsheet to HMRC’s systems. You must still keep original records and supporting documents, such as invoices and bank statements. GOV.UK says to create records as close to the date of the transaction as possible, and for each quarter before the update deadline or before you send the update, whichever is earlier. If your software connects to your bank account, you may need to add extra detail, such as the Self Assessment category.
• Send quarterly updates every 3 months for each self-employment and property business you have. Each update gives totals by category of your self-employment and property income and expenses from the start of the tax year. Other income is not included. Updates are summaries, not tax returns, and you must send one even if you had no income or expenses in the period. If you correct a record during the tax year, the correction is picked up in your next quarterly update.
• Submit your tax return using your software. After the fourth quarterly update, you may need to make accounting and tax adjustments, claim reliefs and allowances (including capital allowances), and correct your records by resending the fourth update or adjusting the category totals. You then check the other income HMRC has added, such as PAYE income and pensions, add anything missing, such as savings interest and dividends, and submit your return by 31 January following the end of the tax year.

Each sole trade needs its own records and quarterly updates. All your UK properties together count as one UK property business, and all your overseas properties as one foreign property business.

Quarterly update periods and deadlines

Each update covers the period from the start of the tax year to the end of the update period, not just the previous 3 months. Standard update periods follow the tax year, and GOV.UK says to use them if your accounting period aligns with the tax year (6 April to 5 April):

• 6 April to 5 July: due by 7 August
• 6 April to 5 October: due by 7 November
• 6 April to 5 January: due by 7 February
• 6 April to 5 April: due by 7 May (in the following tax year)

If your accounting period runs from 1 April to 31 March, GOV.UK suggests considering calendar update periods, which it says will make record keeping simpler. These cover 1 April to 30 June, 1 April to 30 September, 1 April to 31 December and 1 April to 31 March, with the same deadlines as above. You must select calendar update periods in your software for each source of income before you send your first quarterly update, and you cannot change the update periods for a tax year once you have sent an update.

You can send an update at any time from the end of the update period to the deadline. You can also send it up to 10 days before the end of the period if you do not expect to record any further transactions.

Tax returns and paying tax

• MTD for Income Tax does not change the way you pay tax or the dates that payments are due.
• Your tax return and any balancing payment are due by 31 January following the end of the tax year. If you make payments on account, they are due by midnight on 31 January and 31 July.
• For the tax year before you start using MTD, you submit your Self Assessment return as you normally do. For the April 2026 group, that is the 2025/26 return, due by 31 January 2027. For the April 2027 group, it is the 2026/27 return, due by 31 January 2028.

Penalties

If you have to use MTD for Income Tax, new late submission and late payment penalties replace the current penalties for your personal tax return from the tax year you join. The current Self Assessment penalties still apply to earlier years. For the April 2026 group, that means the 2025/26 return and payment due by 31 January 2027. GOV.UK says that from April 2027 the new penalties will apply to everyone who submits a personal Self Assessment return.

Late submission: penalty points

• 2026/27: there are no penalty points for missing a quarterly update deadline. You must still keep digital records and send your quarterly updates before you can submit your tax return. Penalty points do apply to a late 2026/27 tax return, due by 31 January 2028.
• From the 2027/28 tax year: you get one point for each missed quarterly update deadline, as well as for a missed tax return deadline. You can only get one point per deadline, even if you have more than one business. MTD for Income Tax points are kept separate from any VAT points.
• The threshold is 4 points. When you reach it you get a £200 penalty, and a further £200 penalty each time you miss another submission deadline. If you signed up voluntarily, you do not get points for late quarterly updates, but you do get points for late tax returns and the threshold is 2 points.
• Points expire. While you are below the threshold, each point is removed automatically 24 months after the missed deadline.
• Once you reach the threshold, all your points are removed only when you have sent your quarterly updates and tax returns on time for 12 months, and sent any outstanding quarterly updates and tax returns for the previous 24 months.

Late payment

Late payment penalties are not points based and apply to each late payment. They apply to balancing payments and to amounts due after an amendment or assessment, but not to payments on account. For the April 2026 group, the new late payment penalties apply to tax for 2026/27 onwards.

In your first year of the new penalties, you have 30 days from the payment due date to pay in full or contact HMRC to set up a payment plan. After that the period is 15 days, and the 30-day period is given only once. If a payment plan is agreed and you keep up the payments, penalties are paused from the date you contacted HMRC.

For the 2026/27 tax year:

• Up to 15 days late: no penalty.
• 16 to 30 days late: 3% of the tax owed at day 15, or no penalty if it is your first year.
• 31 days or more late: 3% of the tax owed at day 15 and 3% of the tax owed at day 30, plus an annual rate of 10% on the outstanding amount, charged daily from day 31 until the tax is paid or for a maximum of 2 years, whichever is sooner.

For the 2027/28 tax year, the day 15 and day 30 rates rise to 4% each. There is still no penalty for a payment 16 to 30 days late in your first year, and the annual rate stays at 10%.

Late payment interest is also charged from the first day a payment is late until it is paid in full, in addition to any penalty.

What landlords in particular should know

• Rental income counts towards qualifying income before any expenses are deducted.
• If you own a property jointly, your own share of the rental income counts towards your qualifying income. For example, £50,000 of income from a property owned in equal shares gives each owner £25,000. This is normally your share before expenses, but if you only receive notice of your share after expenses have been deducted, HMRC uses that figure.
• All your UK properties together form one UK property business for quarterly updates, and all your overseas properties form one foreign property business.
• The furnished holiday lettings regime was abolished for Income Tax from 6 April 2025. That income now forms part of your UK or overseas property business, so it counts as property income.
• If you are UK resident, both UK and foreign property income count. If you are not UK resident, your UK property income counts, together with any self-employment income declared on your UK return.
• Income from UK Real Estate Investment Trusts (REITs) or Property Authorised Investment Funds (PAIFs) does not count towards qualifying income.
• You or your agent will need to create and store digital records of your self-employment and property income and expenses.

Getting ready: a practical checklist

• Check your qualifying income for 2025/26 (over £30,000 means MTD from 6 April 2027) and keep track of it for 2026/27 (over £20,000 means MTD from 6 April 2028). Use turnover, and add self-employment and property income together.
• If you should already be using MTD, sign in to HMRC online services to check whether you are signed up. If you are not, sign up yourself or ask your agent to do it, and send any overdue quarterly update. The next deadline is 7 November 2026.
• Check whether an exemption applies, and apply at the right time if it is not automatic.
• Choose software before you sign up, using HMRC’s software finder to confirm it works with MTD for Income Tax.
• Consider a separate bank account for your business. In our experience it makes digital records easier to keep.
• Decide between standard and calendar update periods before your first quarterly update.
• Keep your records up to date through each quarter. This makes each update easier to check and send.

Working through the year

Much of the work moves from once a year to during the year. Keeping records up to date through each quarter means the figures are ready to check before each update is due, and gives you an earlier view of your position before the tax return and payment deadline.

Figures checked against GOV.UK on 13 September 2026 and reflect the 2026/27 tax year. This article is general guidance, not advice for your specific circumstances. If you are unsure, get in touch and we will talk it through.

How we can help

3DOM.uk works with sole traders, landlords and limited companies across the Wirral and the wider UK, on fixed monthly fees agreed in advance. We plan our work around your quarterly update and tax return deadlines. Book a free consultation.