If your gross self-employment and property income was over the applicable threshold in the relevant tax year, you must use Making Tax Digital for Income Tax from 6 April 2026. That means compatible software, digital records, and a first quarterly update due by 7 August 2026. Exemptions exist for a small number of cases, but if you have not heard from HMRC, checking your own qualifying income remains your job, not theirs.
TL;DR:
- If your gross self-employment and property income exceeds £50,000 in 2024–25, you must sign up for MTD for Income Tax before April 2026.
- The threshold phases down to £30,000 in 2027 and £20,000 in 2028, expanding the number of affected taxpayers over time.
- You need compatible software to record transactions digitally and submit quarterly updates, with noisy spreasheet users requiring HMRC-recognised bridging tools.
- Missing quarterly updates can lead to penalties, overdue records increase audit risk, and incomplete data may delay refunds or financial applications.
- Working with a dedicated accountant, such as eAccounts, helps manage software linkage, deadlines, and compliance, reducing risk of errors and penalties.
Table of Contents
- Who needs to sign up for MTD for income tax and how to calculate qualifying income
- How MTD for income tax actually works day to day
- What software actually needs to do
- How to sign up and send your first quarterly update
- Exemptions and penalties: what to check before you assume you’re exempt
- Your 30 to 90 day timeline to get MTD-ready
- How to maintain and keep records for MTD compliance
- What happens if you ignore MTD obligations
- An accountant’s view on the transition
- Get MTD-ready with dedicated support from eAccounts
- Sources
- FAQ
Who needs to sign up for MTD for income tax and how to calculate qualifying income
The trigger is straightforward, but the detail trips people up. Your qualifying income is gross income from self-employment and UK property, before expenses. It has nothing to do with profit, and it excludes dividends, savings interest, pension income, or employment pay run through PAYE, according to HMRC’s guidance on qualifying income.
To work out whether you’re in scope for April 2026, look at your 2024–25 Self Assessment return, the one due by 31 January 2026. If your combined gross turnover from self-employment plus gross rental income exceeds £50,000 on that return, you’re in. The threshold then phases down: £30,000 from 6 April 2027, and £20,000 from 6 April 2028, bringing many more sole traders and landlords into scope over time, per the phased rollout confirmed by GOV.UK.
A few points catch people out:
- Joint property income counts at your own share, not the total rent collected.
- Multiple self-employment income streams are added together, not assessed separately.
- HMRC does write to people it believes are affected, but that letter is a courtesy, not a precondition. If your income crosses the threshold and you haven’t heard anything, you’re still required to sign up.
How MTD for income tax actually works day to day
Making Tax Digital for Income Tax replaces one annual paper exercise with a running digital record and four short updates a year. Here’s the sequence:
- Keep digital records. Every business or property transaction gets logged in compatible software as it happens, not reconstructed from a shoebox of receipts in January.
- Send quarterly updates. Every three months, your software submits a summary of income and expenses for that period. This is not a tax return. It gives HMRC (and you) a running estimate of your tax position, helping you see a bill coming rather than being surprised by one, a shift the agent toolkit guidance frames as a move towards proactive financial management rather than reactive form-filling.
- Finalise the annual return. After the fourth quarterly update, you complete your Self Assessment return in the same software, adding any income MTD doesn’t cover, such as employment income, dividends, or capital gains, then submitting by the usual 31 January deadline.
The quarterly updates and the annual return are legally distinct steps. Missing a quarterly update carries its own penalty risk, separate from missing the January deadline.
What software actually needs to do
Not every accounting app on the market is built for this. Before you commit to one, check it can do four things: create and store digital records, send quarterly updates directly to HMRC, submit your annual return, and handle your specific income types and update periods (calendar quarters or tax-year quarters).
Spreadsheet users aren’t automatically excluded, but you need bridging software that links your spreadsheet to HMRC’s systems, since a spreadsheet alone cannot transmit updates. Check with any bridging tool that it’s genuinely HMRC-recognised, not just spreadsheet-compatible in a general sense, a distinction the official software guidance is explicit about.
Before choosing, run through this:
- Does it appear on HMRC’s software finder as recognised for Income Tax?
- Does it handle both self-employment and property income if you have both?
- Can it link to an Agent Services Account if your accountant will be filing on your behalf?
- Does it support your chosen update period without needing to be reconfigured later?
Pro Tip: If your accounting period runs to 31 March, set your update periods to calendar quarters before you send anything. Once your first quarterly update goes in, you cannot change that setting, according to HMRC’s digital records guidance.
How to sign up and send your first quarterly update
Getting from “not registered” to “first update submitted” takes a specific sequence, and doing it out of order causes delays.
- Confirm you’re already registered for Self Assessment and have filed at least one return in the last two years, plus have your National Insurance number to hand, both preconditions for signing up.
- Decide whether you’re handling this yourself or through an agent. If it’s an agent, they’ll need authorising through your Agent Services Account, and you should clarify whether they’re acting as your main agent or a supporting agent, since the two roles have different permissions and mixing them up causes duplicated submissions.
- Sign up for MTD for Income Tax through HMRC’s online service.
- Link your chosen software to HMRC and complete the identity verification checks.
- Run a test entry through the software before your first live quarterly update to catch linking errors early, a step the agent toolkit’s planning guidance treats as essential rather than optional.
Exemptions and penalties: what to check before you assume you’re exempt
Not everyone crossing the income threshold has to comply immediately. Automatic exemptions exist, and some run only until April 2027, so check the current list rather than relying on last year’s advice.
- Trustees, personal representatives of the deceased, and certain non-resident companies are outside scope.
- People who are “digitally excluded”, meaning age, disability, location, or religious belief makes using digital tools genuinely impractical, can apply for an exemption.
- Applications go through HMRC directly, and you should expect a wait for a decision rather than an instant answer, so apply well before your first deadline.
Penalties now run on a points system rather than an automatic fine for every late submission. Miss a quarterly update or return deadline and you pick up a point; reaching the threshold, four points for most quarterly filers, triggers a fixed penalty of £200. The one piece of genuine breathing room: no points apply for late quarterly updates during the 2026–27 transition year, though the annual return deadline still carries normal late-filing consequences. Build a routine now rather than treating the transition year as a free pass you’ll regret relying on.
Your 30 to 90 day timeline to get MTD-ready
Waiting until March 2026 to think about this is how people end up scrambling. Work backwards from the fixed dates:
- Weeks 1 to 4: Check your 2024–25 qualifying income against the £50,000 threshold and choose your software.
- By early 2026: Sign up for MTD, link software to HMRC, and run a test submission.
- From 6 April 2026: Start keeping digital records for every transaction from day one, not retrospectively.
- By 7 August 2026: Submit your first quarterly update, covering the first three months of the new tax year.
- Ongoing: Subsequent quarterly deadlines follow roughly every three months after that.
- By 31 January 2027: Complete and submit your full annual Self Assessment return within the software.
If you discover late that you qualify for an exemption, or that you missed the sign-up window, contact HMRC immediately rather than waiting for the next quarterly deadline to pass unaddressed.
How to maintain and keep records for MTD compliance
Digital record keeping isn’t just “use an app instead of a shoebox.” Each transaction needs specific detail attached at the point of entry: the date, the amount, and a description of what it relates to, whether that’s rental income from a specific property or an expense against a particular self-employment activity. Retrofitting this from bank statements months later defeats the purpose and increases the chance of errors creeping into your quarterly figures.
Reconcile as you go rather than in batches. Landlords with several properties should keep income and expenses separated by property where their software allows it, since HMRC’s quarterly update structure expects income broken down by source. Sole traders running more than one trade should do the same for each business.
Keep supporting evidence, invoices, receipts, and bank statements alongside the digital entries, even though HMRC doesn’t require you to submit them with each quarterly update. If a query arises later, whether from HMRC or your own reconciliation, having the paper trail linked to the digital record saves considerable time. Most compatible software allows you to attach a scanned receipt directly to a transaction entry, which is worth doing at the time rather than filing receipts separately “to sort out later.”
One area landlords often underestimate: mortgage interest, service charges, and letting agent fees need consistent categorisation quarter to quarter. Switching how you categorise the same type of expense between updates creates discrepancies that are harder to unpick at year end than a wrong entry corrected immediately.
What happens if you ignore MTD obligations
Penalty points and fixed fines are the headline consequence, but they’re not the only cost of falling behind. A pattern of late or missing quarterly updates gives HMRC an incomplete picture of your affairs, and an incomplete picture invites scrutiny. Where records are inconsistent or submissions are chronically late, that’s often when a compliance check or a fuller enquiry begins, not because MTD itself increases investigation rates, but because the digital trail makes gaps far more visible than they were on paper.
There’s also a practical knock-on effect for anything time-sensitive. If you’re claiming a tax refund, applying for a mortgage that requires proof of income, or need a tax position confirmed quickly for another financial application, an incomplete or overdue MTD record can hold that process up. Lenders and other bodies increasingly expect Self Assessment data to be current, and a backlog of unfiled quarterly updates makes it harder to produce that quickly.
Persistent non-compliance also strips away the transition-year leniency. The points-based system resets penalty thresholds each year, but a pattern of missed deadlines across multiple years compounds rather than resets to zero, and repeated fixed penalties add up faster than most people expect. None of this is designed to catch people out for a single missed update. It’s designed to penalise drift, the slow slide from “I’ll catch up next quarter” into a backlog that’s genuinely difficult to unwind. Treating each quarterly deadline as non-negotiable from day one is by far the cheaper approach.
An accountant’s view on the transition
The clients who struggle most aren’t the ones with complicated finances, they’re the ones who leave software linking and authorisation until the week before a deadline. An accountant handling this daily catches the small things: a misconfigured update period, a spreadsheet that “links” but doesn’t actually transmit, an agent authorisation set up as supporting rather than main. Fixing those after the first live submission is far harder than fixing them before it.
— Kris
Get MTD-ready with dedicated support from eAccounts
Sorting out software links, agent authorisations, and quarterly deadlines alongside running a business or managing rental property is a lot to carry alone, and mistakes here cost real money in penalty points. eAccounts pairs you with a dedicated accountant who handles the practical side of MTD for Income Tax: linking Xero-based online accounting to HMRC, keeping your bookkeeping current between quarterly updates, and preparing your personal tax return once the fourth update is in.
Rather than juggling software settings and deadline dates on top of your own work, you get one accountant who owns the whole process, from initial sign-up through to your annual return. eAccounts offers accounting packages for sole traders and landlords with transparent monthly pricing. For current prices, see their website. If MTD applies to you from April 2026, get a quote for eAccounts’ small business accounting packages now, well before the first update deadline arrives.
Sources
For primary confirmation, use HMRC’s MTD guidance, the software finder, and the Regulations’ explanatory memorandum.
- Gov
FAQ
What are the requirements for MTD Income Tax?
You need gross qualifying income (self-employment plus property) over £50,000 in 2024–25, HMRC-recognised software that creates digital records and sends quarterly updates, and to submit your annual return through that same software by 31 January, as set out in HMRC’s MTD guidance.
Will HMRC let me know if I need to do MTD?
HMRC typically writes to people it identifies as likely in scope, but that letter isn’t a legal precondition. If your qualifying income crosses the threshold, you’re responsible for checking and signing up whether or not a letter arrives.
Is there any free MTD software that is HMRC recognised?
Some providers on HMRC’s software finder offer free tiers, usually for very simple affairs with one income source, though most sole traders and landlords with property alongside self-employment will need a paid product or bridging tool to cover both. Check the official software finder for current recognised options rather than relying on a general web search.
Why is HMRC moving to MTD?
HMRC’s stated aim is to reduce error by moving from annual, after-the-fact reporting to a running digital record, giving both HMRC and taxpayers a clearer, more current view of tax owed throughout the year rather than a single estimate produced months after the money changed hands.
