Making Tax Digital for Income Tax: who is in scope and what comes next

Making Tax Digital for Income Tax is now live. Since 6 April 2026 it has applied to sole traders and landlords whose qualifying income is over £50,000. Two more groups follow: over £30,000 from April 2027, and over £20,000 from April 2028. This note explains what qualifying income means, what changes day to day, and what to do if you are in the 2027 cohort.

Who is in scope, and how HMRC decides

Qualifying income is a gross figure, not a profit. It is your total turnover from self-employment plus your gross rental income, before any expenses, added together across all of your trades and properties. Employment income, dividends, pensions and savings interest do not count towards the test, although they still go on your return.

HMRC applies the test to a tax return two years back. Whether you had to start in April 2026 depended on the figures on your 2024/25 return. Whether you start in April 2027 depends on the 2025/26 return that is due by 31 January 2027. HMRC writes to people it believes are in scope, but the obligation exists whether or not the letter arrives, so check the number yourself.

Some people are outside the rules for now. Partnerships have no start date yet. Companies are not affected, and there is no date for corporation tax. A small number of exemptions exist, including for people who are digitally excluded, but an exemption has to be applied for and agreed by HMRC rather than assumed.

What changes in practice

Four things change once you are in.

• Digital records. Every business and property transaction is recorded in software, or in a spreadsheet that is digitally linked to MTD-compatible software. Retyping figures from one place into another is not a digital link.
• Quarterly updates. A summary of income and expenses for each trade and each property business goes to HMRC through the software every quarter. The standard quarters start on 6 April, 6 July, 6 October and 6 January, and each update is due by the 7th of the month after the quarter ends. You can elect for calendar quarters if that suits your bookkeeping. Updates are cumulative, so a mistake in one quarter is corrected in the next update rather than by resubmitting.
• MTD-compatible software. HMRC does not provide the software. You choose from its list of compatible products, or use bridging software with a spreadsheet. Landlords with one or two properties often find the simplest products are enough. A trade with stock, staff and VAT usually needs a proper bookkeeping system.
• The final declaration. The quarterly updates do not replace the tax return. After the fourth quarter you make the accounting and tax adjustments, add your other income, and submit the final declaration through the software by 31 January. That step replaces the Self Assessment return you have filed until now.

A points-based penalty system applies to late quarterly updates and to the final declaration. Each late submission earns a point, and a fixed penalty is charged once you reach the threshold. Points expire after a period of filing on time. Late payment penalties are separate and grow the longer the tax is outstanding.

Landlords: joint ownership and more than one source

If you own a property jointly, your share of the gross rent counts towards your qualifying income, not the whole rent. Each joint owner reports their own share. HMRC has provided a simplification for jointly owned property that lets you send quarterly updates of income only and deal with the expenses once a year, which suits owners who receive statements from a letting agent rather than keeping their own ledger.

If you have a trade and a rental business, you send separate quarterly updates for each. UK property and overseas property are separate businesses too. A landlord with a London flat, a villa abroad and a consultancy sends three updates every quarter. The software copes with this if it is set up correctly at the start, and struggles if it is not. Our landlords and property income work covers the set-up as well as the return.

If you are in the 2027 cohort

You have the 2026/27 tax year to prepare. In order:

1. Check the figure. Add turnover and gross rents on the 2025/26 return. If the total is over £30,000, plan for April 2027. If it is close to the line, the same test applies to every later year’s return, so plan anyway.
2. Separate the money. A dedicated bank account for the trade, and another for the rental business, is not a legal requirement. It does turn bookkeeping from a monthly chore into a bank feed.
3. Choose software before April, not during it. Set up the businesses, the bank feeds and the categories while there is nothing to file, then run a quarter of real transactions through it as a test. Our Making Tax Digital readiness work is exactly this.
4. Decide who sends the quarters. You can file them yourself, or authorise an agent through HMRC’s agent services account. We file the quarters and the final declaration for clients, or review what they have filed themselves.
5. Sign up early if the records are ready. HMRC’s testing programme lets you file a year ahead of mandation, so the first compulsory quarter is not the first time you have used the process.
6. Keep the current return going. The 2026/27 return is still an ordinary Self Assessment return, due by 31 January 2028. Joining MTD does not bring that forward.

Where the 2026 cohort is getting it wrong

Five months in, the same problems keep appearing. Records kept in a spreadsheet with figures typed into the software at the quarter end. Rental income entered net of the agent’s fees rather than gross. Two properties treated as two businesses. Personal spending running through the business account because nobody separated them. None of these is difficult to fix, but each is easier to fix before the quarter closes than after.

We assess whether you are in scope, set up the records and file the updates as part of our Making Tax Digital for Income Tax service, alongside the year-end work for sole traders and partnerships.

If you are not sure which cohort you are in, or you would rather someone else set the software up, we offer a 30-minute call at no charge. Bring the last return and we will tell you what applies to you.