Making Tax Digital for Income Tax now applies to the first group of UK sole traders. From 6 April 2026, it is mandatory for eligible sole traders and landlords whose qualifying income for 2024 to 2025 was more than £50,000. The threshold falls to more than £30,000 from 6 April 2027 and more than £20,000 from 6 April 2028.
This guide explains who is affected, what digital records and quarterly updates involve, how the year is finalised, what software is required, and how exemptions work. It provides general information, not individual tax, legal or financial advice.
Who MTD for Income Tax applies to
You need to use MTD for Income Tax when all of the following apply: you are an individual registered for Self Assessment; you receive income from self-employment as a sole trader, property, or both; you have submitted a Self Assessment return; and your qualifying income is above the threshold for the relevant year.
Qualifying income is the combined gross turnover from self-employment and property before expenses. It is not profit, and employment income taxed through PAYE is not included in this particular threshold calculation. If you have more than one sole-trader business or both trading and property income, the relevant gross amounts are considered together.
Current start dates and thresholds
| Qualifying income shown on | Threshold | MTD start date |
|---|---|---|
| 2024 to 2025 tax return | More than £50,000 | 6 April 2026 |
| 2025 to 2026 tax return | More than £30,000 | 6 April 2027 |
| 2026 to 2027 tax return | More than £20,000 | 6 April 2028 |
HMRC may write to people it believes are within scope, but you remain responsible for checking. Use the official GOV.UK eligibility guidance rather than relying on an old article or a software advert.
What changes under MTD
- Keep digital records of business income and expenses.
- Use software that works with MTD for Income Tax.
- Send a summary update for each business every quarter.
- Review, adjust and finalise the year through compatible software.
- Submit the tax return and pay tax due by the usual 31 January deadline.
Quarterly updates are summaries, not four separate tax returns, and they do not create four tax-payment dates. They give HMRC totals from the digital records for the period. You still need to finalise the full tax position after the tax year ends.
Digital-record requirements
Your compatible software must create, store and correct digital records of self-employment and property income and expenses. HMRC advises recording transactions as close to the transaction date as possible. If you operate more than one business, keep a separate set of digital records for each and send separate quarterly updates.
A spreadsheet may form part of a compliant system when it connects through suitable bridging software, but the complete setup must support the required digital records and submissions. Do not assume that ordinary bookkeeping software, or software labelled only as MTD for VAT compatible, automatically supports MTD for Income Tax.
Quarterly updates and deadlines
For standard tax-year update periods, the usual quarterly deadlines are 7 August, 7 November, 7 February and 7 May. A sole trader starting MTD on 6 April 2026 therefore sends the first update by 7 August 2026. Calendar update periods may use slightly different period dates while retaining the same submission deadlines.
Read HMRC’s current step-by-step MTD guide before setting up your periods. If you sign up voluntarily partway through a year, you may need to create digital records from the start of that tax year and send updates for earlier quarters.
What happens at the end of the tax year
After the fourth quarterly update, you must review the records, correct errors, make relevant accounting and tax adjustments, add other income and gains, and claim any reliefs or allowances that apply. You then submit the tax return through compatible software. For the 2026 to 2027 tax year, the filing and payment deadline is 31 January 2028.
MTD changes the record-keeping and submission process; it does not remove your responsibility for an accurate annual tax return or move the normal tax-payment deadline.
Choosing compatible software
Software used for MTD for Income Tax needs to create digital records, send quarterly updates and submit the tax return. Check the live HMRC software finder for recognised products and confirm that the plan you intend to buy supports your income sources and accounting period.
Compare receipt capture, bank reconciliation, invoice tools, data export, accountant access, support and the normal price after any introductory offer. Our MTD software guide and sole-trader accounting software comparison provide a practical shortlist. Zoho Books is an approved affiliate relationship on this site; other named providers are editorial references only unless clearly disclosed.
Exemptions
Some people are automatically exempt and others may apply for an exemption, including where it is not reasonable or practical to use digital tools because of age, disability, location, religious beliefs or another relevant circumstance. Being uncomfortable with software is not automatically enough.
Do not assume an exemption applies until HMRC confirms it where an application is required. Check the official MTD exemption guidance. An exempt person generally continues to report through Self Assessment.
Common mistakes to avoid
- Using profit instead of qualifying income when checking the threshold.
- Ignoring property income when combining qualifying income.
- Assuming an MTD for VAT product also covers MTD for Income Tax.
- Buying software before checking the required plan and income sources.
- Leaving digital records until the quarterly deadline.
- Treating quarterly updates as a replacement for the year-end tax return.
- Relying on an expected HMRC letter instead of checking eligibility.
Sole-trader preparation checklist
- Check the gross self-employment and property income on the relevant tax return.
- Confirm your likely start date using GOV.UK.
- Check whether an exemption could apply.
- Choose recognised software that supports every relevant income source.
- Authorise the software to connect to HMRC.
- Confirm the accounting and quarterly update periods.
- Bring invoices, expenses, receipts and bank records into a regular digital routine.
- Agree responsibilities and timing with your accountant or bookkeeper.
Related guides
- MTD income thresholds explained
- MTD start dates for sole traders
- MTD transition checklist
- Record keeping for UK freelancers
- Sole-trader expenses guide
Last checked: 31 July 2026. Freelance Wallet UK provides general information only. It is not individual tax, accounting, legal or financial advice. Check current GOV.UK/HMRC guidance or consult a qualified professional for your circumstances.