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MTD for Income Tax is HMRC’s rule that sole traders and landlords keep digital records and send quarterly updates through compatible software. It started on 6 April 2026 for qualifying income over £50,000, drops to £30,000 from April 2027 and £20,000 from April 2028. Qualifying income means turnover, not profit.
Making Tax Digital is now live for VAT and for Income Tax, and the thresholds catch more people every April. This guide explains who is in, when, what you have to send and what happens if you are late. If you sell online, there is a section on why marketplace sellers cross the line sooner than they expect.
- What is Making Tax Digital?
- The MTD for Income Tax timeline: 2026, 2027 and 2028
- Working out your qualifying income
- Quarterly updates and deadlines
- Penalties
- How to get ready
- Frequently asked questions
What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC’s programme for moving tax records and filing online. Instead of paper records and one return typed into HMRC’s website each year, you keep digital records of income and expenses and send information to HMRC from software that connects to it directly.
It comes in two parts. MTD for VAT already applies to every VAT-registered business, whatever its turnover, so if you are VAT registered you should already be keeping digital VAT records and filing VAT returns through MTD-compatible VAT software.
MTD for Income Tax (sometimes called MTD for ITSA) is the newer part, and it is the one most people are asking about. It covers sole traders and landlords, and it is being phased in by income level, starting in April 2026. Limited companies are not in MTD for Income Tax, and partnerships are not yet in it either: HMRC says they will join at a later date it has not announced.
The MTD for Income Tax timeline: 2026, 2027 and 2028
HMRC is bringing people in over three years. Each April’s group is decided by your qualifying income on the Self Assessment return two tax years earlier.
| You must use MTD from | If your qualifying income was over | In the tax year |
|---|---|---|
| 6 April 2026 | £50,000 | 2024 to 2025 |
| 6 April 2027 | £30,000 | 2025 to 2026 |
| 6 April 2028 | £20,000 | 2026 to 2027 |
The first group started on 6 April 2026. If HMRC has written to say you are in and you were not expecting it, read our guide on what to do when HMRC signs you up for Making Tax Digital.
The 2027 group is decided by your 2025 to 2026 return, which is due by 31 January 2027. If that return shows qualifying income over £30,000, you will need compatible software and digital records from 6 April 2027. That leaves only a few months between filing the return and the start date, so it is worth working out now which side of £30,000 you are likely to land.
HMRC’s checker for when you need to use MTD for Income Tax is the official place to confirm your own start date.
Working out your qualifying income
Qualifying income is your total gross income from self-employment and property, before any expenses. It is your turnover and your rent received, added together, not the profit you pay tax on. That one detail decides whether most people are in or out.
Here is how it adds up. A sole trader with £27,000 of self-employment turnover who also receives £25,000 of rent has qualifying income of £52,000, so they are over the £50,000 threshold even if their combined profit is far lower. If you jointly own a rental property, only your share of the rent counts.
Some income does not count at all: wages taxed through PAYE, dividends (including from your own company), pensions, and your share of profit from a partnership. HMRC’s page on working out your qualifying income covers the less common cases, such as trusts and part-year income.
This matters most for online sellers. Marketplace businesses often run on thin margins, so a seller with £58,000 of sales on Amazon or eBay may keep only £14,000 of profit after stock, fees and postage. They are still in MTD from April 2026, because the test is the £58,000. We cover the practical side in our MTD guide for ecommerce sole traders.
MTD for Income Tax quarterly updates and deadlines
Once you are in, you send four quarterly updates a year from your software, then submit your tax return through the software after the year ends. Each update is cumulative: it covers everything from 6 April to the end of that quarter, not just the latest three months.
| Standard update period | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May (the following tax year) |
You can switch to calendar update periods ending 30 June, 30 September, 31 December and 31 March instead, and HMRC recommends it if your accounts run from 1 April to 31 March. The deadlines stay the same. HMRC’s quarterly updates guidance explains how to change your period in your software.
A quarterly update is a summary of income and expenses, not a tax bill. Your tax return for the year is still due by 31 January after the tax year ends, and that is still when you pay what you owe. For the first group, the 2026 to 2027 return is due by 31 January 2028. Our guide to the second quarterly update on 7 November walks through preparing one in detail.
Need this done for you? Our FCCA-chartered team sets up MTD software, keeps the records and sends quarterly updates for UK sole traders and online sellers every day. Book a free 30-minute call and we’ll show you what we’d do in the first 30 days.
MTD for Income Tax penalties
There is a soft landing for the first year. HMRC will not apply penalty points for late quarterly updates in the 2026 to 2027 tax year. You still have to send every update before you can submit your tax return, so a missed update is something to catch up, not something to skip.
Late submissions work on points. From 2026 to 2027 a late tax return earns a point, and from 2027 to 2028 each missed quarterly update does too. When you reach the threshold of 4 points you get a £200 penalty, plus another £200 for each later missed deadline. Late payment penalties apply to tax paid late, separately from the points. The full rules are on HMRC’s MTD for Income Tax penalties page.
How to get ready for Making Tax Digital
- Check your qualifying income. Add up the turnover and rent on your last Self Assessment return and compare it with the threshold for the year that applies to you.
- Choose compatible software. HMRC does not provide it. Use HMRC’s tool to choose software for MTD for Income Tax, and check that it covers every income source you have.
- Move your records into it. Connect your bank feed, raise invoices in the software and capture receipts as you go, rather than in a rush at the end of each quarter.
- Record sales, not payouts. If you sell on marketplaces, record gross sales, fees and refunds from each platform’s reports. Payouts arrive net, so recording only what lands in the bank understates your sales.
- Diary the four deadlines. 7 August, 7 November, 7 February and 7 May, plus 31 January for the tax return and payment.
Done properly, MTD has an upside. Up-to-date records mean you see your profit and likely tax bill during the year, rather than finding out in January.
MTD for Income Tax: frequently asked questions
What is the MTD threshold for 2026?
From 6 April 2026 you must use Making Tax Digital for Income Tax if your qualifying income from self-employment and property was over £50,000 in the 2024 to 2025 tax year. Qualifying income is turnover before expenses, not profit. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.
Is Making Tax Digital based on turnover or profit?
Turnover. Qualifying income is your gross self-employment and property income before expenses, so a business with high sales and a low profit can still be in scope. Wages, dividends, pensions and partnership profit shares do not count.
Do I still need to file a Self Assessment tax return under MTD?
Yes. You send four quarterly updates, then submit your tax return for the year through your MTD software by 31 January after the tax year ends. Payment dates, including payments on account, do not change.
Is there a penalty for a late quarterly update?
Not for the 2026 to 2027 tax year: HMRC will not apply penalty points for late quarterly updates in that year. From 2027 to 2028, each missed deadline earns a point, and reaching 4 points brings a £200 penalty.
Does MTD for Income Tax apply to limited companies?
No. MTD for Income Tax covers sole traders and landlords. A limited company is not in it, although a VAT-registered company must already follow MTD for VAT. Partnerships will join MTD for Income Tax at a later date HMRC has not yet announced.
Talk to a UK ecommerce accountant
If you’d like a hand applying any of this to your business, our FCCA-chartered team works with over 700 UK ecommerce sellers across Amazon, Shopify, eBay and TikTok Shop. Tell us about your store and we’ll show you exactly what we’d do. Book a free consultation or request a tailored quote.
