Making Tax Digital for Income Tax (MTD for IT) is the next stage in the government’s plan to modernise the UK tax system. From April 2026 it will replace the current system of annual Self Assessment tax returns for self-employed individuals and landlords with business and/or property income above £50,000. Self-employed individuals and landlords with income above £30,000 will be mandated from April 2027. The threshold will be extended to those earning above £20,000 at a later date. Under MTD for Income Tax, sole trade businesses and landlords will need to keep and maintain digital records and use HMRC-recognised software to manage, track and send updates to HMRC.

The most significant change under the MTD for Income Tax rules is that instead of sending a Self Assessment tax return to HMRC once a year, those affected will have to submit four quarterly updates about their business income and expenses. At the end of the tax year, they will also have to send a final declaration. Under MTD for Income Tax, sole trade businesses and landlords will need to keep and maintain digital records and use HMRC-recognised software to manage, track and send updates to HMRC.

Initially, MTD for Income Tax will only affect self employed business owners and landlords with a total business and/or property income above £50,000 per year. These individuals will have to follow MTD for Income Tax rules from 6th April 2026. MTD for Income Tax will come into effect in April 2027 for self-employed individuals and landlords with a qualifying income of more than £30,000. By the end of the parliament (2029 at the latest) for those with qualifying income over £20,000 a year.

If you’re a self-employed business owner and/or landlord and you’re affected by MTD for Income Tax, you’ll have to take the following actions from 6th April 2026: 1. Keep digital records Under MTD for Income Tax, you’ll need to keep digital records of all your business income and expenses, including all your income from self employment or property. It’s a good idea to start doing this as soon as possible so that you have plenty of time to prepare. You can keep digital records using accounting software such as Xero and FreeAgent. 2. Send quarterly updates You’ll need to send a summary of your business income and expenses to HMRC every three months using MTD-compatible software. The deadlines for submitting quarterly updates will be the same for everyone. From the start of the tax year on 6th April, these deadlines are: • 7th August • 7th November • 7th February • 7th May 3. Submit a final declaration At the end of the tax year, you’ll need to finalise your Income Tax position and submit a final declaration that replaces the current Self Assessment tax return. This process lets you confirm that the updates you’ve sent are correct, add any details about other taxable income or reliefs or make any other necessary adjustments. As with the current Self Assessment process, you’ll have to submit the final declaration and pay the tax you owe by 31st January of the following tax year

Signing up for MTD for Income Tax requires that you have HMRC-recognised software in place first. That’s because you need to sign up to MTD for Income Tax through your cloudbased software, instead of on the HMRC website. If you have multiple self employments, each one will need to be signed up for MTD for IT. Your accountant or bookkeeper can sign you up and HMRC has outlined a separate process for accountants and bookkeepers to follow. Here at Jelly Bean Accountancy we will take care of this for you and help you prepare for the changes.

All property and business income contributes to the £50,000 threshold. For example, if you’re a soletrader earning £35,000 per year from your business, and £20,000 per year from property, you’ll be above the threshold and will therefore need to comply with MTD for IT. If you have multiple businesses or sources of property income, you need to add up the income from all of them to work out whether you’re above the threshold. The same will apply in 2027, when the income threshold for MTD for IT is lowered to £30,000, and eventually £20,000.

Yes, but it can get complicated for MTD. To use spreadsheets for MTD record keeping, you need to have bridging software that can transfer the data from your spreadsheet to HMRC. With MTD for IT, you will need to submit cumulative quarterly statements and a Final Declaration, not just a single annual return. This makes keeping all of the relevant records in a spreadsheet more difficult. And you’ll also need to keep to the digital linking rules. There’s no risk of losing, deleting, or corrupting spreadsheet cells in cloud-based accounting software. HMRC-recognised software acts as safe storage for all your financial records and will also help ensure compliance with MTD.

No. If you’re above the MTD for Income Tax threshold of £50,000, Making Tax Digital is not optional from April 2026. However, people that are digitally exempt do not need to follow MTD rules. This could include people who are elderly, have a disability, or live in a remote location. Foster carers and people who cannot get a National Insurance number are also exempt from MTD for Income Tax. You can request to be made exempt from MTD for Income Tax on the gov.uk website.

If you’re a landlord earning at least £50,000 from property, you’ll need to follow the MTD rules from April 2026 and submit quarterly updates. Instead of a single annual return, MTD for landlords means you’ll need to send quarterly updates from your MTD-recognised software. Alongside this, you'll need to send a Final Declaration by 31 January following the tax year. Your quarterly updates should contain details of your income and expenses. The Final Declaration is where you submit relief claims and declare any additional income such as savings and investment income. HMRC-recognised software can help you meet your landlord tax obligations and complete each part of your submission. Note: Landlords with joint-owned properties have the option to submit expenses annually. However, it's still necessary to include joint property income in quarterly updates. For detailed guidance, refer to HMRC's resources on easements for landlords. Whether you’re receiving rental income from one property or multiple properties, if it’s more than £50,000 a year in total, you must comply with MTD for IT. When it comes to Making Tax Digital, rental income and business income both count towards the threshold. In April 2027, the income threshold will be lowered to £30,000, and all landlords earning above this amount annually will need to comply with MTD for IT rules.

Make sure you have HMRC-recognised software in place, and you’re signed up to MTD for IT before 6 April 2026. Once MTD for IT is mandated there will be penalties for late filing so sign up early if you can or talk to your accountant or bookkeeper about signing up for MTD for Income Tax. The more time you spend getting used to new digital tools, the easier you’ll find the transition to Making Tax Digital. Contact Jelly Bean Accountancy today. You can also find out from HMRC if and when you need to use Making Tax Digital for Income Tax. Keep up to date with the latest on MTD by visiting Making Tax Digital for Income Tax for individuals: step by step - GOV.UK