Making Tax Digital for Income Tax: who, when and how

Who is in scope, and from when

You must follow MTD IT if you are registered for Self Assessment, receive income from self-employment or property (or both), and your qualifying income is above the threshold for the year:

Partnerships are not yet in scope; HMRC has said they will join later, with the timeline to be announced.

What counts as qualifying income

Qualifying income is the total gross income you get in a tax year from self-employment and property combined. Gross means turnover before deducting any expenses or allowances. If you invoice £40,000 as a trade and collect £15,000 in rent, your qualifying income is £55,000 even if your profit is far lower.

Income that does not count: employment (PAYE) income, partnership shares, dividends, pension income and anything else outside self-employment and property. HMRC assesses your qualifying income from the tax return you filed the previous year, and writes to those being brought into the rules.

Exemptions

Some people are automatically exempt: those with qualifying income at or below the current threshold, people without a National Insurance number, trusts, non-resident companies and personal representatives of someone who has died. Those claiming certain reliefs on their 2024/25 return, including averaging relief and qualifying care relief, are exempt until at least April 2027. You can also apply for exemption if it is not reasonably practicable for you to use digital tools because of age, disability, location or religious belief.

The four obligations

1. Keep digital records. Each business transaction must be recorded in software or a spreadsheet that connects to your MTD software. Paper ledgers alone no longer satisfy the rules.
2. Send quarterly updates. A summary of business income and expenses, per income source, sent through MTD-compatible software four times a year. Updates are cumulative: each covers from 6 April to the end of the latest quarter, so earlier mistakes are corrected simply by sending the next update. Deadlines are 7 August, 7 November, 7 February and 7 May. See our deadlines guide for the detail, including the calendar-quarter election.
3. Finalise your year. After the tax year ends you make any accounting and tax adjustments in your software.
4. Submit your tax return by 31 January following the end of the tax year, through your software. Tax payment dates are unchanged: 31 January, with payments on account on 31 January and 31 July if they apply to you.

Penalties

MTD IT uses a points system for late submissions. Each missed deadline earns one point; at four points you receive a £200 penalty, and each further miss while at the threshold costs another £200. Points expire after 24 months if you stay below the threshold. For the 2026/27 tax year, HMRC is not issuing points for late quarterly updates, easing the first mandated group in, but the year-end tax return deadline is penalised as normal. Late payment penalties also apply: for 2026/27, 3% of the unpaid tax at day 15, another 3% at day 30, then 10% a year, rising to 4%/4%/10% from 2027/28.

How to prepare

• Work out your qualifying income from your last filed return. If you are over £30,000 you will be in the rules by April 2027 even if you escaped the first wave.
• Separate business banking if you have not already. Clean statements make digital record-keeping dramatically easier.
• Get your categorisation right early. Quarterly updates use the same expense headings as the SA103 form. Our SA103 guide explains them, and the free statement analyzer applies them to your bank statements.
• Choose MTD-compatible software. HMRC publishes a list of compatible products. QuickMaths is a preparation aid, not filing software: use it to organise data, then file through a compatible product.
• Do a dry run. The quarterly reporter will group a year of statements into the four update periods so you can see what your quarterly figures would look like today.