Making Tax Digital for Income Tax has been talked about for the best part of a decade.
It was first announced in 2015, originally planned for 2018, and delayed so many times that most people stopped taking the deadlines seriously. But as of 6 April 2026, it’s finally live – and if you’re a sole trader or landlord earning above £50,000, it now applies to you.
The first quarterly update is due by 7 August, and there’s a fair bit you need to have in place before then.
We’ll take you through what’s changed, who it affects, and what you need to do.
The First MTD Wave Is Here – and Most People Aren’t Ready
HMRC estimates that around 864,000 taxpayers are caught by the first wave of MTD for Income Tax. As of late April, only about 280,000 had signed up. That’s roughly a third…
The other two-thirds either don’t know they’re affected, haven’t got round to it, or have assumed HMRC would sort it out for them. HMRC won’t do that for you – receiving one of their letters doesn’t complete the sign-up.
It’s a separate process, and you need to go through it yourself or have your accountant handle it. With the first quarterly deadline on 7 August, there really isn’t much time left to get set up!
How Do You Know If You’re Affected?
It comes down to your 2024/25 Self Assessment return – the one that was due by 31 January 2026. If your combined gross income from self-employment and UK property on that return was more than £50,000 (that’s turnover before expenses, not profit), you’re in the first wave.
Something that’s tripping people up is that this is based on the return you already filed, not your current earnings.
So even if your income has dropped below £50,000 since then, it doesn’t get you out of it. Once you’re in, you can only leave MTD after three consecutive years where your income stays below the threshold.
So What’s Changed Under MTD?
If you’ve been filing a Self Assessment return once a year, the routine you’re used to has changed. Instead of pulling everything together in one go before January, you’ll now be keeping digital records throughout the year and sending HMRC quarterly updates through compatible software. In plain terms, MTD replaces your annual return with three things:
- Digital record-keeping – income and expenses tracked in real time using compatible software.
- Quarterly updates – summary figures sent to HMRC four times a year.
- An end-of-year tax return – submitted through your MTD software, replacing the old Self Assessment return.
It sounds like more work – and in some ways it is, at least at first. But the quarterly updates themselves are much simpler than a full tax return.
Digital Records
All your income and expenses need to be recorded using MTD-compatible software that connects directly to HMRC.
Popular options include Xero, FreeAgent, and QuickBooks, though there are plenty of others on HMRC’s approved list.
If you have more than one qualifying income source – a sole trade and a rental property, for example – each one needs to be tracked and reported separately.
Quarterly Deadlines
Your software sends HMRC a summary four times a year, based on fixed quarters that follow the tax year. Here’s what the first year looks like:
- Q1 (6 Apr – 5 Jul) → due 7 August 2026
- Q2 (6 Jul – 5 Oct) → due 7 November 2026
- Q3 (6 Oct – 5 Jan) → due 7 February 2027
- Q4 (6 Jan – 5 Apr) → due 7 May 2027
You can choose calendar quarters instead (starting 1 April rather than 6 April) when you sign up, which some businesses find tidier.
The Final Declaration
After your fourth update, you submit a Final Declaration by 31 January following the end of the tax year. For 2026/27, that’s 31 January 2028.
This is where you confirm your total income, make year-end adjustments, claim reliefs and allowances, and finalise your tax position.
Think of it as a digital version of the old Self Assessment return – except HMRC already has your quarterly data, so there’s less to pull together at the end.
MTD Penalties – and the First-Year Grace Period
MTD comes with a new penalty system that replaces the old flat £100 fines. It’s points-based, and it works a bit differently from what you might be used to.
Every quarterly update or Final Declaration you submit late earns you one penalty point. Once you hit four points, HMRC issues a £200 fine – and every late submission after that costs another £200 until you reset by filing on time for a sustained period.
Late payment penalties run separately, with interest from the due date and charges starting at 2% of unpaid tax after 15 days, rising to 4% after 30 days.
The good news is that HMRC has built in a soft landing for year one. During 2026/27, they won’t issue penalty points for late quarterly updates. That gives you room to get used to the new rhythm without racking up points while you’re still finding your feet. But there are limits to that grace period that are easy to miss:
- Your Final Declaration isn’t covered – a late submission still earns a point.
- Late payment penalties apply from day one, so any tax owed still needs to be paid on time.
- From 2027/28 onwards, the full points system kicks in with no further grace.
The best way to think about this first year is as a practice run. Build the habits now, while the consequences are lighter, so that quarterly reporting feels routine by the time penalties are fully live.
Signing Up for MTD
Many have assumed that because HMRC knows they’re affected, they’ll be enrolled automatically.
That’s not how it works – you need to actively sign up, either yourself or through your accountant.
What You’ll Need
Before you start, make sure you have the following to hand:
- Your Government Gateway login details (the same ones you use for Self Assessment)
- Your business start date, or the date you started receiving property income
- The tax year you want to start using MTD from
Registration is done through HMRC’s online service and takes about 15 minutes.
Watch Out For
There are a few things that catch people out during the process that are worth knowing before you start:
- If you have multiple income sources, you’ll need to check that each is included in the online service and add any that aren’t – a sole trade and a rental property are treated as separate sources.
- Being registered for MTD for VAT doesn’t count. This is a completely separate registration, even if you’re already filing VAT digitally.
- Once you’re signed up, you still need to connect your software to HMRC’s system before you can submit anything.
If you’re not sure which software suits your business, we’ve put together a guide to choosing accounting software that covers the main options. Popular choices include Xero, FreeAgent, and QuickBooks – but your accountant can recommend something based on how you work.
If You’re in the Next MTD Wave
If your gross income from self-employment and property is between £30,000 and £50,000, you won’t be required to use MTD until April 2027. But the return that decides whether you’re caught is your 2025/26 return, due by 31 January 2027 – so you’ll know soon enough.
Our advice? Don’t wait until January to think about it. Everyone who went through the first wave scramble will tell you the same thing – preparation makes all the difference. A few things you can do now to get ahead of it:
- Check your qualifying income. Look at your 2025/26 figures and see whether your combined self-employment and property turnover is likely to cross £30,000.
- Start using digital records. Even before you’re required to, getting into the habit of recording income and expenses in software makes the transition far easier.
- Talk to your accountant early. Choosing software, understanding the quarterly rhythm, and working out how reporting fits around your business are all easier to sort out in advance.
A further wave at the £20,000 threshold is planned for April 2028, so the reach of MTD will keep widening over the next couple of years.
How Double Point Can Help
This is the biggest change to tax reporting for sole traders and landlords in over 30 years, and we know it can feel like a lot to take on – especially when HMRC guidance has continued to evolve right up to the launch.
Whether you haven’t signed up yet, you’re not sure about software, or you’d rather just hand the whole thing to someone who’ll make sure it’s done properly, our team of chartered accountants can take care of it.
Book a free consultation with us and we’ll get you sorted before 7 August.