Making Tax Digital for Income Tax is the biggest change to Self Assessment in years. If you are a sole trader or landlord, it changes how you keep records and how often you report to HMRC. The first group started in April 2026, and more people come into scope in 2027 and 2028. This guide explains, in plain English, who it applies to, when, what you will need to do, and how to prepare. It is general information, not personal advice, so check HMRC's guidance or speak to an accountant about your own situation.

What Making Tax Digital for Income Tax is

HMRC describes Making Tax Digital for Income Tax as its new way to do Self Assessment for sole traders and landlords. Instead of gathering a year's worth of figures once a year, you:

  • keep digital records of your self-employment and property income and expenses using compatible software
  • send a quarterly update to HMRC every three months
  • submit your tax return through your software after the end of the tax year

Who it applies to

According to HMRC's eligibility guidance, you need to use Making Tax Digital for Income Tax if all of the following apply:

  • you are a sole trader or a landlord registered for Self Assessment
  • you get income from self-employment, property, or both
  • your qualifying income is more than the relevant threshold for the tax year

Qualifying income is your total income from self-employment and property, before expenses. HMRC explains how to work out your qualifying income. This is a common source of confusion: it is based on gross income, not profit.

Partnerships will also need to use it in future, but HMRC says it will set out the timeline at a later date.

When you need to start

HMRC's guidance sets out three waves, based on your qualifying income in an earlier tax year:

| Qualifying income | Tax year HMRC looks at | Start date | | --- | --- | --- | | Over 50,000 pounds | 2024 to 2025 | 6 April 2026 | | Over 30,000 pounds | 2025 to 2026 | 6 April 2027 | | Over 20,000 pounds | 2026 to 2027 | 6 April 2028 |

HMRC says it will review your Self Assessment tax return each year, and if your qualifying income is above the threshold it will write to you to confirm you need to start by the following tax year. However, HMRC is also clear that if you do not receive a letter, it is still your responsibility to check if and when you need to use it.

HMRC has an online tool to check if you need to use it, when you need to start and whether you may be exempt.

Exemptions

Some people are exempt, for example if you are digitally excluded. Some exemptions are automatic and some you need to apply for. HMRC explains these in its guidance on exemptions from Making Tax Digital for Income Tax. If you are exempt, you still need to report your income through a normal Self Assessment tax return.

What you will need to do

Keep digital records

You will need to create and store digital records of your self-employment and property income and expenses using software that works with Making Tax Digital for Income Tax. You also still need to keep the original records and supporting documents, such as bank statements and invoices.

If you use more than one product, for example a spreadsheet plus separate submission software, HMRC says the records must be digitally linked. Once a record has been sent in a quarterly update, you must not move it by retyping it or copying and pasting it into other software.

Send quarterly updates

Every three months your software adds up your digital records into totals, which you send to HMRC. HMRC describes these as summaries, not tax returns. HMRC does not receive individual receipts or invoices, and you do not need to make accounting or tax adjustments before sending an update.

Each update covers the tax year so far. With standard update periods the deadlines are:

| Update period | Deadline | | --- | --- | | 6 April to 5 July | 7 August | | 6 April to 5 October | 7 November | | 6 April to 5 January | 7 February | | 6 April to 5 April | 7 May |

If your accounting period runs from 1 April to 31 March, you can choose calendar update periods instead, which end on the last day of each quarter. The deadlines are the same. You must choose this before sending your first update of the tax year.

You must still send an update even if you had no income or expenses in that period.

Submit your tax return

After the year ends, you make any adjustments and submit your tax return using your software.

Penalties

HMRC uses a points-based system for late submissions. According to its guidance:

  • For the 2026 to 2027 tax year, HMRC will not apply penalty points for late quarterly updates. Penalty points still apply to late tax returns.
  • After that, each late quarterly update earns a point, and reaching 4 points leads to a 200 pounds penalty.

If you volunteer to join early, penalties do not apply to late quarterly updates while you are volunteering, though they still apply to late tax returns.

A useful side effect: a running tax estimate

After each quarterly update, you can get an estimate of your tax bill for the year so far in your software and your HMRC online account. For many sole traders and landlords, seeing a running figure during the year may make budgeting for tax easier than finding out after the year has ended.

How to prepare now

1. Work out your qualifying income for the relevant tax year, using gross self-employment and property income. 2. Use HMRC's checker to confirm whether and when you need to start. 3. Choose software. HMRC publishes a list to help you find compatible software. Check it supports your type of income. 4. Separate business and personal finances where you can. A dedicated bank account makes digital record keeping much simpler. 5. Start keeping digital records now, even before you are required to. It is easier to get into the habit early. 6. Decide who will submit. If you have an accountant or tax agent, agree how you will work together and who sends updates. 7. Sign up when the time comes. HMRC's step by step guide explains the process.

We also explain the record keeping side in more detail in our guide to keeping digital business records.

Where Dawn Studio fits in

We are not your accountant, and nothing here is tax advice. Where we can help is the admin around it: practical AI automation that works with your existing tools for capturing receipts, sending reminders and keeping records tidy. If that would help, get in touch.

Frequently asked questions

Is qualifying income the same as profit?

No. HMRC bases qualifying income on your total self-employment and property income before expenses are taken off.

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

Yes, you submit your tax return through your compatible software after the end of the tax year. You also need to file a normal return for the tax year before you start.

Can I use a spreadsheet?

You can use spreadsheets as part of your records if they are digitally linked to software that can send updates to HMRC. Manually retyping or copying and pasting records that have been submitted is not allowed.

What if I have both a business and rental income?

Your qualifying income combines both. You send quarterly updates for each self-employment and property business you have.

I have not had a letter from HMRC. Am I safe?

Not necessarily. HMRC says it is your responsibility to check if and when you need to use Making Tax Digital for Income Tax, even if you do not receive a letter.