Making Tax Digital for Income Tax: Are You Affected?

Quick answer: does MTD for Income Tax apply to me?

MTD for Income Tax applies from 6 April 2026 if your qualifying income from self-employment and/or property was over £50,000 on your 2024/25 Self Assessment tax return.

The threshold then reduces in later years:

• over £50,000 from 6 April 2026
• over £30,000 from 6 April 2027
• over £20,000 from 6 April 2028

The important point is this: the threshold is based on your turnover before expenses, not your profit.

So if you earned £55,000 from self-employment but had £20,000 of expenses, your qualifying income is still £55,000.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax changes how affected sole traders and landlords keep records and report income to HMRC.

Instead of only preparing your figures once a year for Self Assessment, you will need to:

• keep digital records of your income and expenses using MTD-compatible software
• send quarterly updates to HMRC during the tax year
• submit a final tax return through software after the tax year ends

The quarterly updates are summaries of your income and expenses. They are not full tax returns, but they must be sent using compatible software.

Your annual tax return does not disappear. You still need to finalise your position after the end of the tax year, including any other income, adjustments, allowances, and reliefs.

Who is affected, and when?

MTD for Income Tax is being introduced in stages based on your qualifying income.

Qualifying income usually means your total turnover from self-employment and property before any expenses are deducted.

| If your qualifying income was… | Based on which tax return? | You need to start MTD from… |
| ------------------------------ | -------------------------: | --------------------------: |
| More than £50,000 | 2024/25 tax return | 6 April 2026 |
| More than £30,000 | 2025/26 tax return | 6 April 2027 |
| More than £20,000 | 2026/27 tax return | 6 April 2028 |

So if your self-employment and/or property income on your 2024/25 tax return was above £50,000, MTD applies to you now.

If your qualifying income was between £30,000 and £50,000, your deadline is expected to be April 2027.

If your qualifying income was between £20,000 and £30,000, your deadline is expected to be April 2028.

What counts as qualifying income?

Qualifying income includes income from:

• self-employment
• sole trader work
• freelance work
• consultancy work
• contractor income
• UK property rental income
• overseas property rental income, where applicable

It does not usually include:

• employment income from PAYE
• dividends from a limited company
• savings interest
• pension income
• capital gains

If you have both self-employment income and rental income, they are added together when checking the threshold.

For example, if you earned £42,000 from self-employment and £14,000 from rental income, your total qualifying income would be £56,000.

That means you would be above the £50,000 threshold.

A practical example

Let’s say you are a freelance graphic designer earning £42,000 a year from client work.

You also rent out a property that brings in £14,000 a year.

Your qualifying income would be:

£42,000 + £14,000 = £56,000

That puts you above the £50,000 threshold.

MTD for Income Tax would apply to you from 6 April 2026.

Now let’s change the example slightly.

If your property income was £5,000 instead of £14,000, your qualifying income would be:

£42,000 + £5,000 = £47,000

That would put you below the £50,000 threshold for April 2026, but you may still need to prepare for MTD from April 2027 if your income remains above £30,000.

Not sure how to calculate your qualifying income? Aurestone Advisory can review your latest tax return and help you understand whether MTD applies to you.

Are there any exemptions?

Some people may not need to use MTD for Income Tax straight away.

You may not need to use MTD if:

• your qualifying income is below the relevant threshold
• you only have PAYE employment income and no self-employment or property income
• HMRC has granted you a digital exclusion exemption
• your self-employment or property income sources have ceased and you have told HMRC

Digital exclusion may apply where it is not reasonably practical for someone to use digital tools because of age, disability, location, religion, or another valid reason. This normally needs to be agreed with HMRC.

Partnerships and limited companies are not currently covered by MTD for Income Tax in the same way as individual sole traders and landlords.

Do not assume you are exempt without checking. If you are unsure, speak to an accountant or contact HMRC.

What happens if you do nothing?

If MTD applies to you, ignoring it is risky.

You will still need to:

• keep digital records
• use compatible software
• send quarterly updates
• submit your final tax return through software
• pay your tax bill on time

For the 2026/27 tax year, HMRC has said it will not apply penalty points for missed quarterly update deadlines for the first group of taxpayers joining MTD.

However, this does not mean you can ignore MTD.

You still need to keep digital records and send your quarterly updates before you can submit your final tax return.

Penalties can still apply for late tax returns and late payment of tax.

From later tax years, HMRC’s points-based penalty system will become more important. Missing quarterly update deadlines can lead to penalty points. If you reach the penalty threshold, you may receive a financial penalty.

The safest approach is to get your records, software, and process organised before the deadlines arrive.

What changes about your annual tax return?

Less than many people think.

You still need to submit a final tax return after the end of the tax year.

The difference is that, under MTD, your income and expense records should already be kept digitally and your quarterly updates will already have been sent to HMRC during the year.

Your final tax return is where you confirm the full year’s position and include anything else that may affect your tax calculation, such as:

• employment income
• dividends
• savings interest
• pension income
• student loan information
• personal allowances
• tax reliefs
• adjustments
• other taxable income

So MTD does not remove the need for year-end tax work. It changes the process and makes record-keeping throughout the year much more important.

Quarterly update deadlines for the 2026/27 tax year

If you are in the first MTD wave because your qualifying income was above £50,000 on your 2024/25 tax return, you need to start keeping digital records from 6 April 2026.

Your quarterly update deadlines are:

| Quarterly update | Deadline |
| ---------------------------- | --------------: |
| First quarterly update | 7 August 2026 |
| Second quarterly update | 7 November 2026 |
| Third quarterly update | 7 February 2027 |
| Fourth quarterly update | 7 May 2027 |
| Final tax return for 2026/27 | 31 January 2028 |

Depending on your software and accounting period, your update periods may be based on standard tax-year periods or calendar quarters.

Your software should help confirm which update period applies to you.

Not sure if MTD applies to you?

The easiest starting point is your most recent Self Assessment tax return.

Look at the income you declared from:

• self-employment
• sole trader work
• freelance or contractor work
• property rental income

Then check the total before expenses.

If the combined total was above £50,000 on your 2024/25 tax return, MTD applies from April 2026.

If the combined total was between £30,000 and £50,000, you should start preparing for April 2027.

If the combined total was between £20,000 and £30,000, you should keep an eye on the April 2028 rules.

If you work with an accountant, they should help you check whether you are affected. If you are not sure, it is better to ask now rather than wait for an HMRC letter.

What should you do now?

If you think MTD may apply to you, take these steps:

• Check your latest Self Assessment tax return.
• Work out your total qualifying income before expenses.
• Confirm whether the £50,000, £30,000, or £20,000 threshold applies to you.
• Choose MTD-compatible software.
• Start keeping digital records properly.
• Make sure your income, expenses, receipts, and mileage are organised.
• Speak to an accountant if you are unsure.

The earlier you prepare, the easier the transition will be.

What to read next

Post 2: What software do you need for Making Tax Digital?

A plain-English guide to the types of MTD-compatible software, what to look for, and which options work well for sole traders, freelancers, and landlords.

Post 3: What to do this month if MTD applies to you

A practical step-by-step guide for people who need to act now, covering sign-up, software, digital records, quarterly updates, and your first MTD deadline.

Need help checking if MTD applies to you?

If you are a sole trader, freelancer, contractor, or landlord and you are unsure whether MTD applies to you, Aurestone Advisory can help you review your position.

We can help you check:

• whether your income is above the MTD threshold
• what records you need to keep
• whether your current bookkeeping system is enough
• what software options may suit your situation
• what steps to take before your first quarterly update

Book a free review with Aurestone Advisory or message us on WhatsApp.