After years of delays, Making Tax Digital for Income Tax (MTD) has finally come into effect. From 6 April 2026, sole traders and landlords within the regime must maintain digital records and submit quarterly updates to HMRC through approved software. This replaces the traditional annual Self-Assessment tax return for those within scope.
MTD is part of HMRC's broader programme to modernise the tax system. Those within scope report their income and expenses to HMRC on a quarterly basis throughout the year, with a Final Declaration submitted at the year end to confirm their overall tax position.
Who is affected?
The regime applies to self-employed individuals and landlords whose combined gross self-employment and rental income exceeds the relevant threshold. Those with qualifying income above £50,000, as reported on their 2024/25 tax return, are in scope from April 2026.
For high net worth individuals with rented properties, the threshold is particularly low and many will be within scope. Less obviously, it could also apply where a parent has gifted a property to their child and is paying market rent (to ensure the gift is effective for inheritance tax purposes), with the child unexpectedly finding themselves within the MTD regime.
The threshold falls to £30,000 from April 2027 and £20,000 from April 2028, meaning the number of people affected will continue to grow. Partnerships are expected to be brought within scope at a later date.
Timing and filing obligations
Quarterly updates must be submitted by 7 August, 7 November, 7 February and 7 May. To illustrate, the first quarter of the 2026/27 tax year runs from 6 April 2026 to 5 July 2026, with the first update due by 7 August 2026 (one month after the quarterly period). The Final Declaration must be submitted by 31 January following the end of the tax year.
Exemptions
Trustees, personal representatives and non-resident companies are exempt from the regime. HMRC will also consider individual exemption applications where compliance is not reasonably practicable, for example due to age, disability or remoteness of location.
Penalties
A points-based penalty system applies to missed quarterly submissions. Once the points threshold is reached, a £200 penalty is charged. Separate late payment penalties apply where tax remains unpaid more than 15 days after the due date, rising further if payment has not been made by day 30.
Time to act
If you think MTD may affect you, please do get in touch.