If you’re self-employed or you rent out property, HMRC is changing how you report your income, and the change is bigger than most people realise. Making Tax Digital for Income Tax (often shortened to MTD for Income Tax) replaces the old once-a-year tax return with digital record keeping and regular online updates throughout the year.

It sounds like a lot of extra admin, and in some ways it is. But it doesn’t have to be stressful. Once you know your start date, your income threshold, and what software you need, it’s simply a case of building a new habit. This post walks you through exactly that, in plain English, with no confusing jargon.

What Is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is HMRC’s move away from paper records and annual tax returns, towards keeping your business or rental income digitally and sending HMRC a short summary every three months. Instead of one big Self Assessment at the end of the year, you’ll send four quarterly updates plus a final year-end statement.

This isn’t optional if you’re above the income threshold for your year. It’s a legal requirement. The good news is that the quarterly updates are just summaries. You won’t be paying tax four times a year, and you’ll still confirm your final figures at the end.

1. Know Your Income Threshold

This is where most confusion starts, so let’s clear it up straight away. Your Making Tax Digital threshold is based on your gross income, the total money coming in before you take off any expenses, not your profit. Many small business owners assume they’re safe because their profit is modest, then discover their turnover actually puts them over the line.

How the Thresholds Work

• Over £50,000 in gross income from self-employment and/or property (based on your 2024/25 tax return): you must join from 6 April 2026
• Over £30,000: you must join from 6 April 2027
• Over £20,000: you must join from 6 April 2028

A Few Important Details

• If you have more than one source of qualifying income, say, a bit of self-employed work and a rental property, HMRC adds them together. £29,000 from a trade plus £22,000 from rent means you’re over £50,000 combined, and you’d need to join from April 2026.
• Income that doesn’t count towards the threshold includes wages from a job, dividends, and savings interest.
• HMRC works out your threshold using your Self Assessment return from two years before your start date, so your 2024/25 return decides whether April 2026 applies to you.

Recommended action: Pull up your last tax return and check your gross income from self-employment and property, added together. If you’re close to a threshold, don’t guess. Speak to a Making Tax Digital accountant who can confirm exactly where you stand and whether any exemptions might apply to you.

2. Understand the Timeline and What Happens Each Quarter

Once you’re in the system, the shape of your year changes. Instead of one Self Assessment deadline, you’ll have four quarterly updates and a final declaration.

Your Quarterly Deadlines for 2026/27

For someone joining in April 2026, a typical year looks like this:

• 6 April to 5 July 2026: first quarter, update due 7 August 2026
• 6 July to 5 October 2026: second quarter, update due 7 November 2026
• 6 October to 5 January 2027: third quarter, update due 7 February 2027
• 6 January to 5 April 2027: fourth quarter, update due 7 May 2027
• Final Declaration: due 31 January 2028, confirming your full year’s figures and any other income like interest or dividends

These quarterly updates simply summarise your income and expenses for that period. They’re not a full tax calculation, and you won’t owe anything extra just for submitting one on time. The Final Declaration at the end of the year is where everything gets pulled together and your actual tax bill is confirmed.

Miss a deadline, though, and it does matter. Late updates now count towards a points-based penalty system rather than an automatic fine. Points build up for each missed deadline, and once you hit the limit, a fixed penalty follows. Staying on top of quarterly dates from day one avoids this entirely.

Recommended action: Add your quarterly deadlines to your calendar now, even if your start date is 2027 or 2028. Getting into the rhythm early, updating your records weekly rather than scrambling before each deadline, makes the whole process far less stressful.

3. Get Your Records and Software Ready Before Your Start Date

Making Tax Digital for Income Tax requires you to keep digital records using compatible software. A spreadsheet on its own won’t cut it unless it’s linked to bridging software that sends the data to HMRC automatically. This is the part that catches people out, because it’s not just about picking an app; it’s about changing daily habits.

Practical Steps to Get Ready

A few practical steps make this manageable:

• Separate business and personal spending. If you’re still paying for stock, fuel, or tools on a personal card, now is the time to open a dedicated business account.
• Choose your software early. Popular options include Xero and QuickBooks, or bridging software if you’d rather keep using spreadsheets.
• Digitise as you go. Photograph receipts and log income weekly rather than letting paperwork pile up in a drawer or the van.
• Test before you’re mandated. You can voluntarily join the scheme before your official start date to iron out any issues while there’s no pressure.

Recommended action: Book time this month to audit your current record keeping. If you’re still relying on paper receipts or an unlinked spreadsheet, start moving to compatible software now, well before your mandatory start date arrives.

Bringing It All Together

Making Tax Digital for Income Tax is a genuine shift in how sole traders and landlords report to HMRC, but it’s a manageable one if you tackle it in order. Check your gross income against the thresholds to find your start date, get familiar with the quarterly timeline so deadlines don’t creep up on you, and get your digital record keeping sorted well in advance.

If you’d rather not navigate this alone, that’s exactly where a Making Tax Digital Accountant earns their keep: checking your threshold, setting up the right software, and making sure your quarterly updates go in on time, every time, so you can get back to running your business.

Ready to get ahead of your Making Tax Digital start date? Get in touch with R&R Chartered Certified Accountants in Blackburn today, and we’ll help you prepare with confidence.

Need help? Talk to our Blackburn team about our Self Assessment and tax return service and MTD-compatible cloud accounting.

WRITTEN BY

Rehan Razzaq, ACCA

Founder, R&R Chartered Certified Accountants

ACCA Chartered Certified and Xero Certified Advisor, helping Blackburn businesses and landlords with accounts, tax and financial planning since 2021.

More about Rehan →