Making Tax Digital for Income Tax: Deadlines, Thresholds and What Sole Traders and Landlords Must Do Now

13 July 2026

Making Tax Digital for Income Tax (MTD for Income Tax, also known as MTD for ITSA) is now live. Since 6 April 2026, sole traders and landlords with qualifying income above £50,000 have been legally required to keep digital records and submit quarterly updates to HMRC. The first quarterly update deadline is 7 August 2026, and it is closer than many people realise. If you have not yet signed up, chosen software or started keeping digital records, there is still time to get compliant, but you need to act now. This guide explains what MTD for Income Tax is, who it applies to, the key deadlines for the 2026/27 tax year and how Affinity Associates Isaacs & Co can help you get everything in order.

What Is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is HMRC's initiative to modernise the way individuals with self employment or property income manage and report their tax affairs. Under the new system, qualifying taxpayers must:

Keep digital records of their income and expenses using MTD compatible software
Submit quarterly updates to HMRC summarising their income and expenses for each quarter
Submit a final declaration at the end of the tax year to confirm all figures and claim any reliefs or allowances

The annual Self Assessment tax return is being replaced by this combination of quarterly reporting and a year end finalisation. The aim is to give both taxpayers and HMRC a more accurate, up to date picture of tax liabilities throughout the year, rather than settling everything in a single annual exercise.

Who Does MTD for Income Tax Apply To?

MTD for Income Tax is being introduced in phases based on qualifying income, which is your combined gross income from self employment and property before expenses:

April 2026 (now in force): Sole traders and landlords with qualifying income above £50,000 are already mandated. Whether you are in scope for 2026/27 is based on the figures in your 2024/25 Self Assessment tax return.
April 2027: The threshold drops to £30,000, bringing a further wave of sole traders and landlords into the regime.
April 2028: Those with qualifying income above £20,000 will be mandated, covering the majority of people currently filing Self Assessment.

The threshold refers to gross income before expenses, not taxable profit. A landlord with rental income of £55,000 a year is in scope now, even if their net profit after deductible expenses is much lower. HMRC has been writing to taxpayers it believes are in scope, but the legal responsibility to check sits with you, whether or not a letter arrives.

Limited companies are not affected by MTD for Income Tax. They have separate obligations under Corporation Tax, which is subject to its own digitisation plans.

Key MTD for Income Tax Deadlines for 2026/27

If you were mandated from April 2026, these are the dates to put in your calendar:

7 August 2026: First quarterly update, covering 6 April to 5 July 2026
7 November 2026: Second quarterly update, covering the period to 5 October 2026
31 January 2027: Deadline for your 2025/26 Self Assessment tax return, the final one filed under the old system, plus your usual tax payment and first payment on account
7 February 2027: Third quarterly update, covering the period to 5 January 2027
7 May 2027: Fourth quarterly update, covering the period to 5 April 2027
31 January 2028: Final declaration for the 2026/27 tax year, which replaces the Self Assessment return, along with payment of any tax due

Note that MTD changes how often you report, not when you pay. Tax payment dates remain 31 January and 31 July as before.

What Does Quarterly Reporting Actually Mean?

Under MTD for Income Tax, the tax year is divided into four quarters. For most taxpayers these align with the standard quarter dates: 6 April to 5 July, 6 July to 5 October, 6 October to 5 January and 6 January to 5 April. If your bookkeeping runs on calendar months, you can elect to use calendar quarters instead, but this choice must be made in your software before your first submission and cannot be changed mid year.

At the end of each quarter, you submit a summary of your income and expenses for that period to HMRC using MTD compatible software. Quarterly updates do not require you to calculate your final tax liability and no tax payment is triggered. They are a running record of your trading activity submitted digitally to HMRC four times a year.

A useful feature of the system is that quarterly updates are cumulative. Each submission covers the year to date and overwrites the previous one, which means an error in an earlier quarter is corrected automatically in your next update.

After the fourth quarter, you submit a final declaration confirming your annual figures, adding any income not covered by the quarterly updates (such as employment or investment income) and claiming allowances or reliefs. This replaces the Self Assessment tax return, and HMRC's old online filing portal is not available to MTD users.

What Software Do You Need for MTD for Income Tax?

You need HMRC recognised MTD compatible software to comply. The software must be able to keep digital records of your income and expenses and submit quarterly updates directly to HMRC. You cannot use the existing HMRC online portal for MTD for Income Tax submissions.

A wide range of products are approved, including cloud accounting platforms such as Xero and QuickBooks as well as dedicated sole trader and landlord tools. HMRC maintains a list of compatible software on its website.

If you currently manage your income and expenses on spreadsheets, you will need to move to compliant software or use bridging software that connects your spreadsheet data to HMRC's systems. For most people, moving to a proper cloud accounting platform is the more practical and efficient option, and it pays for itself in time saved.

At Affinity Associates Isaacs & Co, we help clients select and set up the right software for their circumstances and make sure records are maintained correctly throughout the year.

What Does MTD for Income Tax Mean for Landlords?

Landlords are among those most significantly affected. Many private landlords have been used to filing a single Self Assessment return each year to declare rental income and expenses. Under MTD for Income Tax, landlords with gross rental income above the threshold must keep digital records of all rental income and associated expenses and submit quarterly updates for their property business.

If you have both a sole trader business and rental income, each income source needs its own separate quarterly updates, so a sole trader with a buy to let submits two streams of quarterly data, not one combined figure. This makes getting organised and choosing the right software particularly important.

If you are a landlord already over the £50,000 threshold, you are in the regime now and your first update is due on 7 August 2026. If you expect to be brought in from April 2027 or 2028, speaking to Affinity Associates Isaacs & Co early means you can prepare properly rather than face a scramble before your mandation date.

What Happens If You Miss an MTD Deadline?

HMRC operates a points based penalty system for late submissions under MTD for Income Tax. Each missed quarterly update or final declaration earns a penalty point, and once enough points accumulate a £200 financial penalty is charged. The system is designed to penalise persistent non compliance rather than isolated mistakes.

There is one important concession for the first year. Taxpayers mandated from April 2026 will not receive penalty points for late submission of their quarterly updates during 2026/27. This soft landing applies only to the first cohort and only to quarterly updates. You must still file all four updates before HMRC will accept your final declaration, and the final declaration itself remains subject to normal late filing penalties. Late payment of tax also continues to attract interest and late payment penalties as before, so the sensible approach is to build good habits from the very first quarter.

Not Started Yet? How to Get Ready Before 7 August 2026

If you are in scope and have not yet set anything up, here is what to do now:

Confirm you are in scope. Check the gross self employment and property income on your 2024/25 tax return against the £50,000 threshold.
Choose and set up MTD compatible software. Every transaction from 6 April 2026 onwards needs to be recorded digitally, so any backlog should be entered as soon as possible.
Sign up for MTD for Income Tax. Connect your software to HMRC, or authorise your accountant to submit on your behalf through their Agent Services Account.
Submit your first quarterly update by 7 August 2026. Filing a few days early gives you a buffer if you spot an error or HMRC's systems are slow.
Speak to your accountant. MTD changes how your accountant works with you throughout the year, so it is worth agreeing the new process now.

Even if your mandation date is April 2027 or April 2028, starting good digital bookkeeping habits now will make your transition far smoother, and you can join voluntarily to get used to the system before it becomes mandatory.

How Affinity Associates Isaacs & Co Can Help

MTD for Income Tax is a fundamental shift in how sole traders and landlords deal with HMRC, and the first deadline of the new regime is already on the horizon. At Affinity Associates Isaacs & Co, we are running MTD for Income Tax submissions for clients right now. We can assess whether and when you fall into scope, choose and set up the right software, establish digital record keeping, clear any backlog since April, and manage your quarterly submissions and year end finalisation on your behalf.

The sole traders and landlords who will find this transition easiest are the ones who act early. If you would like to discuss how MTD for Income Tax affects you, call the team at Affinity Associates Isaacs & Co on 07788 207181 or get in touch through our website today.

Frequently Asked Questions

When is the first MTD for Income Tax quarterly update due?

The first quarterly update for taxpayers mandated from April 2026 covers the period 6 April to 5 July 2026 and must be submitted to HMRC by 7 August 2026 using MTD compatible software. The remaining deadlines for 2026/27 are 7 November 2026, 7 February 2027 and 7 May 2027.

Who does MTD for Income Tax apply to?

MTD for Income Tax applies to self employed sole traders and landlords whose gross qualifying income (before expenses) exceeds the relevant threshold. The £50,000 threshold has applied since April 2026, dropping to £30,000 from April 2027 and £20,000 from April 2028. Limited companies are not affected, as they operate under a separate Corporation Tax regime.

What does quarterly reporting involve?

Quarterly reporting means submitting a summary of your income and expenses to HMRC four times a year using MTD compatible software. Updates are cumulative, so each submission covers the year to date and corrections carry through automatically. At the end of the year you submit a final declaration confirming your annual figures and claiming reliefs or allowances, which replaces the annual Self Assessment tax return.

What software do I need for MTD for Income Tax?

You need software recognised by HMRC as compatible with MTD for Income Tax, such as Xero or QuickBooks, or a dedicated sole trader or landlord product. The software must keep digital records and submit quarterly updates directly to HMRC. Spreadsheets alone are not sufficient, although bridging software can connect spreadsheet data to HMRC's systems in some cases.

What happens if I miss an MTD for Income Tax deadline?

HMRC operates a points based penalty system. Each late submission earns a penalty point and accumulating four points triggers a £200 penalty. For the 2026/27 tax year only, the first cohort of taxpayers will not receive penalty points for late quarterly updates, but all four updates must still be filed before the final declaration can be submitted, and late payment of tax still attracts interest and penalties.

Do I still need to file a Self Assessment tax return?

Yes, one more. The 2025/26 Self Assessment return, due by 31 January 2027, is the last one filed under the old system. From the 2026/27 tax year onwards, mandated taxpayers report through quarterly updates and a final declaration in MTD software instead.