Making Tax Digital —
the rules, deadlines, and who it affects

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) launched on 6 April 2026 — widely described as the most significant change to the UK tax system in a generation. If you are a sole trader or landlord, it replaces the familiar single annual tax return with quarterly digital reporting throughout the year. The first wave of taxpayers is now living with it in practice, with the first quarterly deadline having passed in August 2026. The next wave joins from April 2027, and a third from April 2028.

This post explains who is affected, exactly how the new reporting cycle works, the deadlines you need to know, and what the transition looks like if you are not yet in scope.

Who is affected — and when

MTD for ITSA applies to sole traders and landlords based on qualifying income — your gross turnover from self-employment plus gross property income, before any expenses are deducted. This is an important distinction: it is turnover, not profit, that determines whether you fall within scope.

From	Qualifying income threshold	Assessed using
6 April 2026	Over £50,000	2024/25 tax return
6 April 2027	Over £30,000	2025/26 tax return
6 April 2028	Over £20,000	2026/27 tax return

Income from employment, pensions, or dividends does not count towards the qualifying income figure — only gross self-employment turnover and gross property income are included. If you have both a trade and rental property, the two are added together to determine whether you cross the threshold.

HMRC identifies who is affected using the Self Assessment return you have already filed — there is no separate application. If your qualifying income on your most recent return exceeds the relevant threshold, HMRC will write to confirm you are being brought into MTD from the following April.

What changes — the new reporting cycle

Instead of a single annual Self Assessment return, MTD replaces the process with four quarterly updates per income source, followed by a year-end Final Declaration.

Update	Period covered	Deadline
Q1	6 April – 5 July	7 August
Q2	6 April – 5 October	7 November
Q3	6 April – 5 January	7 February
Q4	6 April – 5 April	7 May
Final Declaration	Full tax year	31 January following the tax year

Each quarterly update is a running cumulative total for the tax year, not a standalone quarter — so the Q2 update covers April to October, not just July to October. Updates must be submitted using HMRC-approved software; you cannot file MTD updates through the standard Self Assessment online portal.

The Final Declaration at the end of the year functions similarly to the old tax return — it is where you claim reliefs, report income not covered by MTD (such as capital gains, foreign income, or savings interest), confirm your final figures, and calculate the total tax due. If you have income sources outside the scope of MTD, you may still need to complete supplementary pages alongside the declaration.

Digital record-keeping — what's required

The core requirement underpinning MTD is that you maintain digital records of your business income and expenses throughout the year, rather than reconstructing them at year-end from paper receipts or a spreadsheet updated once a year. Records must be kept using MTD-compatible software — this can be dedicated accounting software (Xero, QuickBooks, FreeAgent, Sage) or, for straightforward cases, a spreadsheet linked to HMRC via bridging software.

What counts as a digital record:

• Each individual transaction — not a bulk monthly total — for income and expenses
• Date, amount, and category of each transaction
• Records maintained continuously, not compiled retrospectively

If you already use accounting software for day-to-day bookkeeping, adapting to MTD is largely a matter of ensuring your software has MTD-compatible submission functionality — most major platforms have built this in as standard. If you currently rely on a shoebox of receipts and an annual reconciliation, this is the point at which that approach becomes non-viable.

Penalties — the new points-based system

MTD introduces a points-based penalty system for late submissions, replacing the old approach for the returns it covers. Each missed quarterly deadline earns one penalty point. Once you accumulate four points (for those on the annual filing frequency) or two points (for those on quarterly), a fixed £200 penalty applies for that missed submission and every subsequent late one, until you have a run of on-time submissions to reset your points.

What about VAT and limited companies?

MTD for VAT has applied to all VAT-registered businesses since April 2022, regardless of turnover — this is already in effect and unaffected by the ITSA changes described above.

HMRC has signalled an intention to extend Making Tax Digital to Corporation Tax for limited companies, but no mandatory start date has been confirmed. Directors of limited companies are not currently required to join MTD for ITSA in respect of their company's trading income — the ITSA rules apply to sole traders and landlords reporting personal income through Self Assessment, not to companies filing CT600 returns. However, a director who also has personal self-employment or rental income above the threshold would be brought into MTD for that income in the normal way.

Partnerships

General partnerships are expected to join MTD from April 2027, though HMRC has not yet confirmed the exact date. If you trade through a partnership, it is worth monitoring HMRC's guidance over the coming year rather than assuming the sole trader timeline applies directly.

Getting ready before your threshold hits

• Check your qualifying income now. Add your gross self-employment turnover and gross rental income from your most recent tax return — not your profit — to see where you sit against the thresholds.
• Move to compatible software early. Even if you are a year or two away from mandation, switching to digital record-keeping before you are required to removes the pressure of a hard cut-off and gives you time to iron out any teething issues.
• Understand what quarterly reporting actually demands. It is a change in discipline as much as software — transactions need to be recorded as they happen throughout the year, not batched up at year-end.
• Talk to your accountant about the transition. If you use an accountant for your Self Assessment, ask specifically how they plan to handle your MTD submissions and what they need from you and by when.

This article is for general information purposes and does not constitute tax advice. MTD rules, thresholds, and penalties continue to evolve. Always check current HMRC guidance or speak to a qualified accountant before making decisions.