Making Tax Digital for Income Tax 2026: Deadlines, Thresholds and What to Do Next

Making Tax Digital for Income Tax became mandatory from 6 April 2026 for many sole traders and landlords with qualifying income above £50,000. Those affected must keep digital records, submit quarterly summaries through compatible software and complete their annual tax return. The first quarterly deadline was 7 August 2026, but a missed update still needs to be submitted even though first-year quarterly penalty points do not apply.

Who has to use Making Tax Digital for Income Tax in 2026?

An individual generally had to start using MTD for Income Tax from 6 April 2026 if they were registered for Self Assessment, received income from self-employment or property, and had qualifying income above £50,000 for 2024/25.

The threshold is based on gross qualifying income before expenses, not taxable profit. For a UK-resident taxpayer, HMRC considers self-employment income and both UK and foreign property income shown on the relevant tax return.

An illustrative example makes the distinction clearer. A sole trader with sales of £42,000 and allowable expenses of £18,000 also receives gross rent of £12,000. Their accounting profit is not the MTD test. Their combined qualifying income is £54,000, so they may have entered MTD from April 2026 even though neither source alone exceeded £50,000.

PAYE employment income, dividends, pensions, savings income and capital gains do not form part of this particular threshold calculation.

For businesses moving from spreadsheets or irregular bookkeeping, our cloud bookkeeping guide explains how digital records can be organised without making the process unnecessarily complicated.

What are the MTD quarterly deadlines for 2026/27?

For most people using standard tax-year update periods, the quarterly deadlines are:

Some taxpayers use calendar-quarter periods instead. The filing deadlines remain 7 August, 7 November, 7 February and 7 May, but the records included in each update cover calendar quarters.

Quarterly updates do not replace the annual tax return. They are summaries generated from the digital income and expense records maintained for each self-employment or property business.

Our 2026 UK business tax calendar covers other deadlines that may need to sit alongside MTD, including VAT, PAYE and Corporation Tax.

What happens if you miss an MTD quarterly deadline?

HMRC will not apply penalty points for late quarterly updates in the 2026/27 tax year. This is a first-year easement for quarterly submissions, not an exemption from MTD.

If an update is outstanding, the practical steps are:

• Check whether you were actually required to use MTD from April 2026.
• Confirm that you or your agent completed the separate MTD sign-up.
• Bring the digital income and expense records up to date.
• Submit the missing update through compatible software.
• Check that the remaining quarterly periods and deadlines are correctly set up.

The outstanding updates still need to be sent before the eventual MTD tax return can be submitted. Separate penalties can continue to apply to late annual returns or late tax payments.

Is an MTD quarterly update another tax return?

An MTD quarterly update is not a completed tax return. The software adds together the digital records for the relevant business and sends category totals for income and expenses to HMRC.

You do not normally need to complete every accounting or tax adjustment before sending a quarterly update. Adjustments for matters such as capital allowances and some end-of-year tax treatments are dealt with through the annual process.

This distinction matters because owners can otherwise spend time trying to make every quarterly figure final. The records should be complete and accurate enough to produce a reliable summary, but the update is not intended to recreate the full annual accounts four times.

Can you rely on the estimated tax bill shown by MTD software?

The developing estimate can help with budgeting, but it should be treated as an indication rather than an exact amount to withdraw from or leave in a tax reserve.

The estimate depends on the information recorded so far. It may change because transactions are missing, costs have been placed in the wrong category, other taxable income has not yet been included, or the final tax treatment of an item has not been determined.

At LYA, we would normally compare an estimate with the underlying records and the taxpayer's wider position before using it as a cash-planning figure. That is the useful difference between seeing a number on a dashboard and understanding what the number includes.

The same principle applies more widely to management information. Our article on how real-time data improves SME decisions explains why current information still needs proper interpretation.

Who will enter MTD from April 2027 and April 2028?

The MTD qualifying-income threshold reduces in stages:

The £30,000 group should not wait until March 2027 to examine the position. The 2025/26 figures already determine whether MTD is likely to apply, making the tax-return and bookkeeping process the sensible time to confirm the answer.

How should a sole trader or landlord prepare for MTD?

A practical preparation review should cover the following:

• Confirm each source of self-employment and property income.
• Calculate qualifying income using gross figures before expenses.
• Decide which software will hold the digital records and send updates.
• Check whether existing spreadsheets need compatible bridging software.
• Decide whether the owner or accountant will maintain the records and submit updates.
• Set aside time to correct the bookkeeping before each deadline.
• Keep the annual tax-return and payment deadlines in the calendar.

Digital records work best when the process fits the way the business or property activity actually operates. Software alone does not correct duplicated bank transactions, missing invoices or inconsistent expense categories.

Frequently asked questions

Does PAYE salary count towards the MTD threshold?

No. The qualifying-income test focuses on gross self-employment and property income. PAYE salary is not included in this threshold calculation.

Do expenses reduce qualifying income for MTD?

No. Qualifying income is measured before expenses. A business can therefore be within MTD even when its taxable profit is substantially below the relevant threshold.

Does submitting an update mean the tax must be paid quarterly?

No. Quarterly updates do not bring forward the normal Self Assessment payment timetable. The annual return and tax-payment requirements still apply.

Can an accountant submit the quarterly updates?

Yes. An authorised agent can sign up a client, maintain or review records and submit the updates through compatible software, depending on the service agreed.

Need help with MTD for Income Tax?

If you are unsure whether MTD applies, have missed an update or need a workable digital-record system, anyone in the LYA team would be happy to help. Call 01372 374143 or email support.london@loveyouraccountants.com.