The tax return you file by 31 January 2026 isn’t just about settling your 2024/25 tax bill. It’s also the trigger that determines whether you’ll need to start using the new MTD system for sole traders and landlords.
If your gross income from self-employment or property rental exceeds £50,000 in the 2024/25 tax year, HMRC will use that return to identify you as someone who must start quarterly digital reporting from 6 April 2026. That’s less than three months away from the January filing deadline.
This is the biggest change to self-assessment since the system launched over 30 years ago.
Around 780,000 people will be affected in the first phase alone. If you’re anywhere close to that £50,000 threshold, you need to understand what’s coming and start preparing now.
What Is Making Tax Digital for Income Tax Self Assessment (MTD For ITSA)?
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) replaces the annual self-assessment tax return with quarterly digital updates and a final once-a-year submission.
Instead of one return in January, you’ll report your income and expenses four times throughout the year using MTD-compatible software.
The main changes are straightforward. You’ll keep digital records (paper won’t cut it), submit four quarterly updates roughly five weeks after each quarter ends, and complete a final declaration by 31 January to declare any other income and finalise your tax bill.
All of this must be done through approved software – HMRC’s online portal and paper forms won’t be options anymore.
The first quarterly update for the 2026/27 tax year is due on 7 August 2026.
Does Your 2024/25 Return Really Determine Your Deadline?
Yes, it does. HMRC will review all self-assessment tax returns filed for the 2024/25 tax year to identify who needs to start using MTD from April 2026.
The test is simple: if your gross income from self-employment and property rental combined exceeds £50,000 for 2024/25, you’re in.
Gross income means your total turnover or rent received before deducting any expenses, allowances, or tax reliefs.
What Counts Towards the £50,000 Threshold
Only specific types of income count towards the MTD threshold. This catches people out because many assume all their income is relevant, but HMRC only looks at certain sources.
Income that counts:
- Gross income from self-employment (all trading income before expenses)
- UK property rental income (gross rents received before deductions)
- Foreign property rental income (where it’s part of your UK taxable/property return position)
- Combined total from all self-employment and property sources
Income that doesn’t count:
- PAYE employment income (salary or wages taxed at source)
- Dividends from shares or company ownership
- Savings interest or investment income
- Pension income
This distinction matters. You might have £80,000 in total income for the year, but if £40,000 is PAYE salary and only £40,000 is self-employment income, you’re below the threshold. You’d continue using the traditional self-assessment system.
However, if you have £35,000 from self-employment and £20,000 from property rental, that’s £55,000 of qualifying income. You’re over the threshold and must start MTD in April 2026.
When HMRC Notifies You
Assuming you file your 2024/25 tax return before the 31 January 2026 deadline, HMRC has said they will send you a letter by March 2026 at the latest if you’re required to use MTD from 6 April 2026.
That gives you about four weeks to prepare. Four weeks to choose software, set up digital record-keeping, and completely change how you manage your tax affairs.
If you wait for that letter before doing anything, you’ll be under serious time pressure. The sensible thing is to check your position now. If your 2024/25 income is anywhere near £50,000 from qualifying sources, assume you’re in and start preparing immediately.
The Phased Rollout: When Does MTD Apply to You?
MTD isn’t a single switch-on date. It’s being rolled out in phases based on your gross income from self-employment and property:
- 6 April 2026: Gross income over £50,000 in 2024/25 (around 780,000 people affected)
- 6 April 2027: Gross income over £30,000 in 2025/26
- 6 April 2028: Gross income over £20,000 in 2026/27
- Below £20,000: Continue using traditional self-assessment unless you choose to join MTD voluntarily
Each phase uses the tax return from the previous year to identify who’s affected. Your 2024/25 return (filed by 31 January 2026) determines whether you start in April 2026.
Read our guide on the top 5 steps you need to follow to get ready.
What You Need to Do Under MTD
Once MTD applies to you, your tax reporting routine changes completely. The annual scramble in January becomes a quarterly process spread throughout the year.
Quarterly Updates
You’ll submit four updates each year, covering roughly three-month periods. For the 2026/27 tax year, the deadlines are:
- 7 August 2026: First quarter (6 April to 5 July 2026)
- 7 November 2026: Second quarter (6 July to 5 October 2026)
- 7 February 2027: Third quarter (6 October 2026 to 5 January 2027)
- 7 May 2027: Fourth quarter (6 January to 5 April 2027)
These updates summarise your income and allowable expenses for each period. They don’t calculate your final tax bill. They’re just progress reports to HMRC showing what you’ve earned and spent.
End of Year Final Declaration
After submitting your fourth quarterly update, you’ll complete a final declaration by 31 January 2027 (for the 2026/27 tax year). This is where you:
- Declare any income that isn’t covered by quarterly updates (PAYE wages, dividends, savings interest)
- Claim tax reliefs and allowances
- Calculate your final tax liability for the year
- Make any balancing payment or claim any refund due
Final declaration finalises everything (including adjustments), and also reports other income (PAYE/dividends/interest).
Software Requirements
You can’t submit quarterly updates or final declarations through HMRC’s website. You must use MTD-compatible software that connects to HMRC’s systems.
The software market includes accounting packages (like Xero, QuickBooks, FreeAgent), specialist MTD tools, and bridging software that links spreadsheets to HMRC. Prices vary from free basic options to £20-30 per month for comprehensive packages.
You’ll need to choose software, set it up, and get comfortable using it before your first quarterly deadline. That’s not something you can leave until the week before.
Common Misconceptions About MTD
There’s a lot of confusion about MTD, and some of the common assumptions people make are completely wrong.
“My accountant will handle it”
Even if you use an accountant, MTD changes how you work with them. The annual routine of handing over a year’s worth of paperwork in January won’t work anymore.
You’ll need to maintain better records throughout the year and communicate with your accountant quarterly, not annually.
“I can just estimate my quarterly figures”
No. The quarterly updates must be based on actual records. You can’t guess or estimate. If HMRC investigates and finds you’ve been making up numbers, you’ll face penalties.
“If I drop below £50,000 next year, I can stop using MTD”
Not quite. Once you’re in the MTD system, you generally stay in it even if your income drops.
There are limited exemptions (like if you cease trading entirely), but a temporary dip in income below the threshold doesn’t let you opt out.
“The software will do everything automatically”
MTD software helps, but it won’t magically organise your finances. You still need to categorise expenses, record income, and reconcile bank transactions.
The software makes submitting updates easier, but you have to give it accurate data. Working with an accountant will help hugely here.
What Happens If You Don’t Comply?
If you’re required to use MTD from 6 April 2026 and you don’t submit what HMRC requires, penalties can apply – but they don’t work like the old self-assessment £100/£10-per-day rules.
Late Quarterly Updates (2026/27 “Soft Landing”)
If you’re in the first mandatory group starting 6 April 2026, HMRC won’t apply penalty points for late quarterly updates during your first tax year (2026/27). This gives you 12 months to get used to the new system without facing financial penalties for missing quarterly deadlines.
However, you still need to send the quarterly updates. You generally can’t submit your end-of-year final declaration until all four quarterly updates are filed. Miss those updates, and you’ll struggle to complete your tax return on time, even if you’re not being penalised for the late quarterlies themselves.
Late End-of-Year Return / Final Declaration
Penalties still apply if you’re late with your final declaration, even during the soft landing year.
HMRC uses a points-based system:
- Each late annual return gives you one penalty point
- Once you reach two points, you get a £200 penalty
- Further £200 penalties apply for each additional late return while you’re at the threshold
- If you stay below the threshold, points drop off after 24 months
Late Payment
If you pay your tax late, late payment penalties and interest can still apply, even during the quarterly soft landing year. The soft landing only covers late quarterly updates – it doesn’t protect you from payment penalties.
How to Prepare Right Now
If your 2024/25 income from qualifying sources exceeds £50,000, you have about 2 months before MTD becomes mandatory. Here’s what to prioritise:
- Check your exact position: Add up your gross income from self-employment and property for 2024/25. If it’s over £50,000, you’re affected.
- File your 2024/25 return early: Don’t wait until 31 January 2026. File as soon as you can after 6 April 2025 to give yourself more time to prepare.
- Get professional advice: This is a fundamental change to how you manage your tax affairs. An accountant can help you choose the right software, set up digital record-keeping systems, and ensure you’re ready for that first quarterly deadline in August 2026.
Waiting until March 2026 when HMRC sends the notification letter leaves you scrambling to choose software, set up systems, and learn a completely new way of working in a matter of weeks.
How Double Point Can Help
MTD for income tax is the biggest change to self-assessment in three decades.
At Double Point, we’re helping clients prepare for the transition by setting up MTD-compatible systems, choosing the right software, and managing the entire quarterly reporting process.
Whether you’re certain you’re affected or you’re not sure where you stand, we can review your position and make sure you’re ready for April 2026.
Book a consultation with Double Point today, and we’ll walk you through exactly what MTD means for you and how to handle it without the stress.