Making Tax Digital for Income Tax: landlords and the self-employed

Updated for Budget 2026. Checked against GOV.UK, October 2026.

Making Tax Digital (MTD) for Income Tax is a new way to do Self Assessment if you're a sole trader or landlord. You keep digital records, send short updates to HMRC every 3 months, and file your tax return through software. It's coming in stages, based on your income from self-employment and property before expenses.

Who has to use it

You need to use MTD for Income Tax if all of these apply:

• you're a sole trader or a landlord, registered for Self Assessment
• you get income from self-employment, property, or both
• your qualifying income is over the threshold for that year

Partnerships don't need to use it yet. HMRC will set out a timeline later.

What counts as qualifying income

Qualifying income is your total self-employment and property income before expenses (your turnover and gross rents). HMRC checks it from your tax return for the year before.

• Counts: sole trader turnover, UK and foreign property income, and your share of rent from a jointly owned property.
• Doesn't count: wages from a job (PAYE), your share of profit from a partnership, dividends, the State Pension and private pensions.

Example

You earn £40,000 from your job. You also get £18,000 a year in rent and take £14,000 from a weekend business. Your qualifying income is £18,000 + £14,000 = £32,000. Your salary doesn't count. If that's your 2025-26 figure, it's over £30,000, so you'd start MTD on 6 April 2027.

When it starts for you

So the 2025-26 return you're doing now (due 31 January 2027) is the one HMRC checks for April 2027. If your income is over the threshold, HMRC should write to you. If you don't get a letter, it's still your job to check and sign up.

Quick check: when do I start?

What you'll have to do

1. Use compatible software

HMRC doesn't provide software. You choose a commercial product that works with MTD for Income Tax. Some create your records for you (for example by linking to your bank account or scanning receipts). Others, called "bridging software", connect to a spreadsheet you already keep. GOV.UK has a tool to find software.

2. Keep digital records

Only for your self-employment and property income and expenses. Each record needs the amount, the date and the category, using the same categories as Self Assessment.

3. Send quarterly updates

A quarterly update is a summary of your income and expense totals, worked out by your software. It isn't a tax return and you don't make tax adjustments. Each update covers the tax year so far, so you can correct mistakes in the next one. You send one for each business, even if nothing happened that quarter.

If your accounts run from 1 April to 31 March, you can choose "calendar" periods instead (ending 30 June, 30 September, 31 December and 31 March). The deadlines are the same. After each update you get an estimate of your tax bill.

4. Submit your tax return

After the year ends, you check your figures, add any other income (such as your job, savings or dividends) and reliefs, then submit your tax return through your software. The deadline is still 31 January, and so is paying your tax. You still send one return a year.

Penalties

Once you're in MTD, new penalties replace the old ones:

• Late submission: a point for each missed deadline. At 4 points you get a £200 penalty, and another £200 for each further missed deadline. Points below 4 expire after 24 months.
• Late payment: nothing if you pay within 15 days. After that, a percentage of the tax owed at day 15 and again at day 30, plus a yearly rate from day 31. In your first year you get 30 days to pay or set up a payment plan before penalties start. Late payment interest is charged as well.

Your 2025-26 return still uses the current penalties, even if you join MTD in April 2026.

Exemptions

• Qualifying income of £20,000 or less: you're automatically exempt.
• No National Insurance number before the tax year starts: automatically exempt.
• Digitally excluded: if your age, health, disability, religious beliefs or location mean you can't reasonably use software, you can apply. Being unfamiliar with software, or the cost, isn't enough on its own.
• Some people are exempt for now, for example some Lloyd's members and ministers of religion, people who claimed averaging relief or qualifying care relief, or people who filed the residence pages (SA109). GOV.UK lists the exact rules.
• Budget 2026 announced that people eligible for qualifying care relief (such as foster carers), non-UK resident entertainers and sportspeople, and people expected to be non-resident will be exempt until further notice. The rules will be made before April 2027.

If you're exempt, you keep filing a normal Self Assessment return.

What to do now

• File your 2025-26 return as normal by 31 January 2027. Its figures decide whether you start in April 2027.
• If you'll be over £30,000, choose software and sign up before 6 April 2027. To sign up you must be registered for Self Assessment and have sent a return in the last 2 years.
• Your first quarterly update would then be due by 7 August 2027.

See also upcoming tax changes.

Sources

• GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax
• GOV.UK: Work out your qualifying income
• GOV.UK: Send quarterly updates
• GOV.UK: Choose the right software
• GOV.UK: Penalties for Making Tax Digital for Income Tax
• GOV.UK: Find out if you can get an exemption
• HM Treasury and HMRC: Budget 2026 overview of tax legislation and rates (sections 2.36 and 2.37)

General guidance, not tax advice. The checker uses only the income thresholds. HMRC makes the final decision and will write to you.