Making Tax Digital for Income Tax (MTD) is a significant change to the UK self-assessment tax system that will impact sole traders, self-employed individuals, and landlords.

From April 2026, the way tax returns are submitted will be changing with the introduction of Making Tax Digital for Income Tax. It is the most significant change to income tax reporting since HMRC introduced self-assessment over 30 years ago.

Instead of submitting your tax return once a year, sole traders, self-employed and anyone earning income from property will be required to maintain digital records and keep their tax affairs up to date with HMRC by submitting quarterly updates.

When does MTD for Income Tax Self Assessment start?

Making Tax Digital for Income Tax is being rolled out in stages over three years from April 2026.

Your start date will depend on your total yearly income from self-employment and/or property rentals.

The key dates for Making Tax Digital compliance for sole traders, self-employed individuals and landlords are:

HMRC will look at your total income from self-employment and property on your latest tax return to determine your start date. If you have other types of income (for example, income from employment (PAYE), dividends or partnership income), these will not be counted towards your qualifying income for Making Tax Digital.

If your income is below the thresholds, you can opt to join MTD for ITSA voluntarily. This will help you to install compatible MTD software and become accustomed to digital reporting before it becomes mandatory.

You will only be required to start using Making Tax Digital for Income Tax after you submit your first tax return. Once you’ve submitted your first tax return, if that return reports turnover from property and/or sole trade businesses above the applicable threshold for that year, you will need to start using MTD from the 6 April following the 31 January filing deadline of your tax return.

What are Making Tax Digital quarterly submissions?

Quarterly updates will be required to be submitted to HMRC four times a year, reporting income and expenditure. The quarterly reporting dates are:

• By default, an individual’s quarterly updates will be set automatically to standard tax quarters. If you wish to change to calendar quarterly updates, you must make an election to do so, and ensure your software is set up for this.
• Each source of income will require a separate quarterly update. For example, you’ll need one update for your UK property income and another for any a source of self-employment income.
• For property income, UK properties will form a single portfolio, and overseas properties will form a separate portfolio and will require separate quarterly updates.
• For individuals running multiple sole trade businesses, you’ll be required to submit a separate report for each business stream. For example, if you have three sole trader business streams, you’ll need to submit three different quarterly updates.
• For MTD, jointly owned property income will be split according to ownership share.
• Quarterly updates will be reported cumulatively, showing total income and expenses from the start of the tax year. This allows for mistakes to be corrected in the following quarter.
• Making Tax Digital quarterly reporting is designed to help individuals have a clearer, up-to-date picture of their tax position throughout the year.

What is a Final Declaration?

At the end of the tax year, you’ll need to finalise your business income for the tax year. A Final Declaration will also be required. This Final Declaration replaces the Self Assessment tax return.

The Final Declaration is used to finalise your business income for the period, make final adjustments to your accounts, claim reliefs, and confirm the accuracy of the information.

On the Final Declaration, you’ll need to list all income sources, including income from self-employment, property income, non-business income (such as wages/PAYE income), capital gains, pensions, and investment income – everything you would usually include on your tax return.

The deadline for the Final Declaration is 31 January following the end of the relevant tax year.

MTD compatible accounting software & digital record keeping

You will need MTD compatible accounting software to enable you to keep and submit digital records of your income and expenses to HMRC. There are many compatible software products on the market and suitable software does not have to be expensive.

Once you qualify for Making Tax Digital, you will no longer be able to submit self-assessment tax returns via the HMRC’s online portal or submit paper tax returns.

Frequently asked Making Tax Digital for Income Tax questions

Does MTD for Income Tax apply to me if I run a limited company?

Making Tax Digital for Income Tax only applies to sole traders and landlords, not directors of limited companies unless they also have MTD-qualifying income.

Is Self-Assessment changing in 2026?

Yes, for some people, the current self-assessment system will change from April 2026. However, initially, it will only change for individuals with a total income above the threshold (see table above).

Instead of an annual self-assessment tax return being filed by 31 January each year, individuals who fall within the new tax rules of MTD will be required to submit quarterly reporting and a Final Declaration.

Self-assessment tax returns remain unchanged for now for individuals with property or sole trade income under the MTD thresholds. However, those under the threshold can choose to voluntarily opt into the new Making Tax Digital for Income Tax regime.

Do individuals need to register for MTD for Income Tax Self-Assessment?

From 6 April 2026, you may need to use Making Tax Digital for Income Tax. Whether you need to sign up depends on your total annual income from self-employment or property.

HMRC will review your Self Assessment tax return and qualifying income each tax year. If your income for the tax year is above the relevant threshold, HMRC will write to you. They will confirm that you must start using Making Tax Digital for Income Tax by the start of the upcoming tax year. You should still ensure you check your income each tax year as it is your responsibility to sign up for MTD if you qualify.

HMRC won’t automatically enrol individuals into MTD for Income Tax. Based on the income reported on your last tax return, they will notify you that you need to start complying. As with self-assessment, individuals will need to sign up online once they reach the threshold or voluntarily.

If you need to use Making Tax Digital for Income Tax from 6 April 2026, you should prepare and sign up for the service as soon as possible. For example, you will need to choose and authorise your software or decide how your accountant will act for you, if you have one.

How will Making Tax Digital for Income Tax affect my self-assessment reporting?

Whilst MTD for Income Tax changes the regularity of reporting for sole traders running small businesses and those that are self-employed, it will also change how many individuals record and manage their finances on a day-to-day basis.

Currently, many self-employed and landlords use spreadsheets and wait until the end of the year to collate receipts, invoices and bank statements. With MTD, you will be required to keep accurate, up-to-date digital records throughout the year and submit the total figures quarterly to HMRC.

One benefit of MTD is that individuals will be more aware of their tax liability throughout the year, rather than just at the end of a tax year, eliminating any ‘nasty surprises’ or unforeseen tax bills.

What challenges does MTD create for individuals?

For individuals currently using spreadsheets or keeping paper records, the transition to MTD-compatible software may cause stress, confusion, and additional costs.

Individuals with multiple income streams and landlords with complex property portfolios will need to submit separate quarterly updates for each income stream. Individuals with joint property income will need to co-ordinate with their co-owners to report income. This will mean more up-to-date record keeping and reporting, as well as additional expense.

Contact Barnes Roffe today to help you through this transition and minimise the stress and cost of accounting software. Once you are set up properly with linked bank accounts and software, it is likely you will find the quarterly reporting and record keeping to be more manageable than a single time-consuming and stressful event when you approach the tax return filing deadline.

What counts as an individual income stream for MTD?

• All your UK properties will be treated as a single property business income stream.
• All your overseas properties of UK residents will be treated as a separate property business income stream.
• Additional separate sole trades or businesses (for example, a consultancy businessor shop) will be treated as their own income stream.

How can I prepare for MTD for Income Tax?

Preparation is key to ensuring you are well-prepared in advance for any changes you will need to make.

If you don’t already use online accounting software, it is worthwhile choosing and using HMRC-approved software to keep up-to-date and accurate records of everything from now on.

DON’T WAIT UNTIL YOU HIT THE THRESHOLD AND HAVE TO COMPLY. Early preparation will help you avoid stress and pressure and may also prevent future tax penalties.

Contact Barnes Roffe today for more help and advice on Making Tax Digital.

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