Last updated: 8 April 2026

This guide has been prepared as a summary of Making Tax Digital for Income Tax (MTD) and to provide some tips on what agents can do to get their firms and their clients MTD-ready.  The information presented on this page represents the ATT’s understanding based on the information available at the date of publication shown. You may wish to check against available legislation and any official guidance on GOV.UK that that position has not changed.

To jump to a specific section of the guide, please use the following links:

• What is MTD?
• Who does MTD apply to?
• When does MTD apply from?
• What does MTD involve?
• What should agents do to prepare?
• Find out more
• Summary: key readiness steps for agents 

What is Making Tax Digital for Income Tax?

MTD will require many landlords and self-employed individuals to keep digital records of income and expenditure relating to their businesses and rental properties.

Those records will form the basis of quarterly updates, which need to be submitted digitally to HMRC. Finally, a 'MTD tax return’ needs to be filed, similar to the current Self-Assessment regime, but with some key differences.

MTD does not change the due dates for paying income tax or filing the tax return.

Behind the scenes at HMRC, MTD is supported by an upgraded computer system which promises enhanced security and better connection with other HMRC systems. This should result in greater pre-population of data already held by HMRC – for instance PAYE income.

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Who does MTD apply to?

MTD will eventually encompass self-employed individuals and landlords with gross ‘qualifying income’ of more than £20,000. Qualifying income means sole trade and property income and is measured before deduction of expenses – see When does MTD apply from for more details.

Exemptions and deferrals

Individuals who don’t have a National Insurance number on 5 April are exempt from MTD for the following tax year. This exemption applies automatically and does not need to be claimed. Further MTD exemptions are available, details of which can be found in our article Making Tax Digital: exemption cases, when and how to apply. 

Outside the scope of MTD, for now

Sole-traders and landlords with turnover of £20,000 or less are not required to comply with MTD, and will remain in the current Self-Assessment regime until further notice.

Partnerships (including LLPs) are not in scope of MTD for now but are intended to be included at a later date. Individual members of a partnership are also not currently within the scope of MTD in respect of their partnership income, despite being treated as self-employed for most tax purposes.  However, any self-employment or property income outside the partnership could bring them into MTD for those non-partnership sources only, where this exceeds the relevant thresholds (see below).

MTD does not apply to companies, and will not be extended to Corporation Tax.

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When does MTD apply from?

The requirements of MTD will apply to sole traders and landlords in three phases:

• Phase 1: from April 2026 – those with gross qualifying income of more than £50,000.
• Phase 2: from April 2027 – those with gross qualifying income of more than £30,000.
• Phase 3: from April 2028 – those with gross qualifying income of more than £20,000.

Qualifying income is the gross income from sole trade and property businesses (ie sole trade and property income combined and measured before expenses). For jointly held sources of income, only the relevant share is counted – eg if a husband and wife own a rental property equally, each spouse’s qualifying income would be their share of the gross rent.

When is gross income measured?

The thresholds for the three phases of MTD mandation will be assessed against the gross qualifying income reported on the most recent tax return filed prior to the mandation date (assuming all returns are filed on time).

For instance, 2024/25 tax returns were due for submission by 31 January 2026. If that return reported gross qualifying income of more than £50,000, that individual has to comply with MTD from April 2026.

If the sole trade or property income declared by an individual relates to a new source of income which started in the year, the figure reported will need to be adjusted in order to compare 12 months’ worth of income against the MTD mandation threshold.

Further details of the MTD income thresholds are available on our website, together with worked examples and guidance on what happens if the qualifying income later drops below the relevant MTD threshold.

Reliefs and allowances

Sole trade or property income which is not reported on a tax return because it is covered by a relevant relief or allowance (such as Rent a Room relief, or the property or trading allowances) does not count towards the MTD thresholds.

However, if the taxpayer is required to join MTD anyway, they may have MTD obligations for any income potentially covered by the property/trading allowance or Rent a Room relief) - see the Digital record keeping section of our Technical FAQs for further details.  

Will HMRC register taxpayers for MTD?

HMRC will not register taxpayers within scope of MTD automatically. Taxpayers whose income meets the relevant threshold will need to sign up to use MTD in a similar way to how taxpayers register for Self-Assessment now.  This includes taxpayers who are already in MTD for VAT.

Agents are able to sign their clients up to MTD but there is no bulk sign-up facility, so this will be a time-consuming exercise for larger firms. 

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What does MTD involve?

There are three key components to MTD:

• digital record keeping,
• quarterly updates, and
• a digital tax return.

Taxpayers may need help from agents and bookkeepers to comply with some or all of these requirements.

Digital record keeping

Under MTD, individuals have to keep digital records of the amount, category and date of income and expenses relating to their sole trade and/or property businesses. These records can be kept either in purpose-built software, or on spreadsheets.

Quarterly updates

Taxpayers within MTD need to submit a summary to HMRC of their income and expenses each quarter, fed from their digital records.  These are not ‘mini tax returns’ as accounting and tax adjustments are optional.  Instead, they just represent the total of each category of income and expense that quarter.

A separate quarterly update is needed for each trade or property business – so a sole trader who also rents out a property would have eight quarterly submissions to make each year.

By default, the quarters follow the tax year, not the accounting period of the business.  Updates must be filed by the 7^th of the month following the quarter-end. So, the first quarter will run from 6 April to 5 July, and the quarterly update needs to be submitted to HMRC by 7 August.

To better align with accounting dates, taxpayers can choose to make a ‘calendar quarters election’. This results in the first quarter running from 1 April to 30 June, the second from 1 July to 30 September and so on. The due dates for filing quarterly updates aren’t affected, so the first quarterly update is due by 7 August, the second by 7 November and so on.

Quarterly updates are cumulative, so if an error is discovered in a previous submission, it can be corrected the following quarter.

You can find out more about quarterly updates in our MTD FAQs.

The MTD tax return

After the fourth and final quarterly update has been filed, the taxpayer will need to submit a ‘MTD tax return’ to finalise their income tax position for the year.

This has similarities with the current Self-Assessment return, but the MTD tax return will be pre-populated with the income and expenses from the quarterly updates already filed. These entries will then need to be adjusted for accounting and tax purposes (eg disallowing elements of private use or capital expenditure).

At the same time, other (non-MTD) sources of income, such as bank interest and PAYE income, will need to be reported, or the pre-populated entries will need to be checked. Additionally, any capital gains must be declared and relevant reliefs claimed.

There is no online filing service provided by HMRC under MTD. Self-employed individuals and landlords in MTD (or their agent) have to use compatible software to file the MTD tax return. That software does not necessarily have to be the same software used to file their quarterly updates.

As with ‘ordinary’ Self-Assessment, the filing deadline is 31 January following the end of the tax year.

Digital links

From the point where business records are created in software, all transfers of data must be made digitally. This includes submitting the quarterly updates, making any corrections, and filing the digital tax return. It also includes transfers of business records, for instance between a client and agent, or a bookkeeper and agent.

Permitted digital transfer methods include emailing, importing data, and use of memory sticks -  copying and pasting or manually retyping entries is not allowed.

Simplification options

A number of options will be available to make MTD compliance easier for some taxpayers, including:

1. Three-line accounts

Where gross sole trade or property income is below the VAT threshold, taxpayers can choose to record each item of income and expense without having to allocate it to a specific income/expense type. The total income and total expenses can then be reported each quarter, with no additional breakdown needed. The exception to this rule is residential finance costs (eg mortgage interest) for landlords, which still have to be categorised separately.

2. Simplified expenses

Taxpayers who are sure they will use simplified expenses or will claim the property and/or trading allowance do not need to keep records of their actual expenses

3. Retail businesses

Retailers can include in their digital records a single daily gross takings figure, rather than recording each transaction individually.

4. Joint property owners

A number of simplification options will be available to accommodate the range of record keeping arrangements which can exist between joint owners of rental properties. The relevant options are explained on our MTD FAQ page. 

We've also prepared a summary of the MTD simplification options, which shows the implications for both digital record keeping and quarterly updates and includes links to further information from HMRC. 

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