One of the most significant changes to personal income tax is taking place from April 2026 onwards and action is required now to ensure you are ready.
At the moment, individuals registered for self-assessment tax returns are required to submit annual tax returns to HMRC by 31 January after the end of the tax year.
For example, for the 2025-2026 tax year that runs from 6 April 2025 to 5 April 2026, individuals will be required to file annual self-assessment tax returns by 31 January 2027, in line with previous years.
However, if you are self-employed or earning income from property, your tax filing requirements are changing from 6 April 2026 onwards.
1) What is happening?
Making Tax Digital (MTD) is a Government initiative to enable the UK to have "one of the most digitally advanced tax administrations in the world."
Those who are VAT registered already have to comply with Making Tax Digital (MTD) rules for VAT, which is to submit quarterly VAT returns to HMRC using compatible software and to keep digital records.
This, in essence, is now being applied to income tax.
From 6 April 2026, individuals captured by MTD rules for income tax will not only be required to file their annual self-assessment tax returns, but will also be required to:
- File quarterly 'updates' to HMRC using compatible software, to inform them of their income and costs for the quarter, and
- Keep digital records for each quarter.
2) Does this really impact me?
The Making Tax Digital rules for Income Tax affect different taxpayers at different times, depending on your gross income.
As a starting point, you are impacted by the Making Tax Digital rules if you earn income from self-employment and/or from property (be it holiday lets, commercial property or tenanted properties). It will not affect those who earn income via partnerships or via limited companies, or individuals who only receive income from employment, savings interest or dividends.
3) When are the changes taking place?
There are 3 different phases to Making Tax Digital for Income Tax, depending on your gross income levels, across your self-employed and property sources.
Phase 1 - annual self-employed and/or property income of more than £50,000
The tax year against which this threshold is tested is the 2024-2025 tax year.
If your 2024-2025 annual self-assessment tax return shows income (i.e. gross turnover/revenue/income before any costs) of £50,000 or more across your self-employed and/or property sources, you will be captured by Phase 1 of MTD effective from 6 April 2026.
This will mean that, from 6 April 2026, you will be required to file quarterly income tax updates to HMRC, as well as file your usual, annual self-assessment tax return.
The deadline to file the quarterly updates will be just over 1 month after the end of the quarter.
That is, from 6 April 2026 onwards, your tax filing deadlines will change as follows:
Under current rules
- File annual self-assessment tax return for 2026-2027 by 31 January 2028
Under new MTD rules from 6 April 2026
- File 1st quarterly MTD update to HMRC for the quarter 6 April 2026 - 5 July 2026 by 7 August 2026.
- File 2nd quarterly MTD update to HMRC for the quarter 6 July 2026 - 5 October 2026 by 7 November 2026.
- File 3rd quarterly MTD update to HMRC for the quarter 6 October 2026 - 5 January 2027 by 7 February 2027.
- File 4th quarterly MTD update to HMRC for the quarter 6 January 2027 - 5 April 2027 by 7 May 2027.
- File annual self-assessment tax return for 2026-2027 to HMRC by 31 January 2028.
Phase 2 - annual self-employed and/or property income of more than £30,000
If your total gross income from self-employment and/or property is more than £30,000, you will be required to file quarterly updates to HMRC from 6 April 2027 onwards (i.e. 12 months after the Phase 1 implementation date).
Phase 3 - annual self-employed and/or property income of more than £20,000
The MTD mandatory threshold will reduce to £20,000 from April 2028 onwards.
Next, we explore what you will need to do once you are required to register for MTD.
4) What do I have to do under the MTD rules?
Once you are captured by the MTD rules (either from 6 April 2026, 6 April 2027 or 6 April 2028, you will be required to:
- Keep digital records
You will need to keep digital records of all your business income and expense transactions, including all your income from self-employment and/or property.
- Submit quarterly updates to HMRC
Once you are signed up to MTD, you will need to submit a summary of your business income and costs to HMRC every 3 months, using MTD-compatible software.
The software we already use for your annual self-assessment tax returns has full MTD-capabilities, therefore we are fully prepared if you wish for us to submit any MTD quarterly updates on your behalf.
Note: HMRC have confirmed they will not be providing free software to file MTD returns. If you wish to file MTD returns yourselves, directly to HMRC, you will need to pay for MTD-compatible software.
Here is a link to the Gov.uk website which lists MTD software providers
- Submit annual declaration to HMRC
Once the tax year has ended, you will need to submit an annual return to HMRC covering the whole tax year.
The starting point for this return will be the information submitted in each of the 4 quarters, and this is when adjustments are made to reflect private use of costs, to claim any potential tax allowances and to declare any other income (such as your interest on savings/investments, etc.).
We anticipate individuals will have many questions about MTD, including how it impacts you and what actions you need to take. In the meantime, we include below a series of Frequently Asked Questions with detailed answers.
Frequently Asked Questions - MTD for Income Tax
Does MTD mean we need to start paying income tax to HMRC each quarter too?
No. Under current guidance, the purpose of submitting quarterly updates is simply to provide more up to date financial information to HMRC.
You will continue to pay income tax by 31 January and 31 July each year (with the latter only if you need to make payments on account, in line with prior years).
I earn £28,000 gross income from self-employment and £23,000 gross income from property. Am I impacted by MTD?
Yes. The threshold for MTD is the total gross income across both self-employment and property. Therefore, in this example, your total income is £28,000 + £23,000 = £51,000.
As this is above £50,000 you will be required to sign up for MTD from 6 April 2026 onwards and start filing quarterly updates and keep digital records from this date.
If you are unsure as to whether you are impacted by MTD, HMRC have launched an interactive tool for you to check this.
The interactive tool can be found here
HMRC have also published a video discussing their plans for MTD
My spouse and I both earn income from jointly owned property. Together, we collect £25,000 in rental income before any costs. Are we impacted by MTD?
No. The income thresholds of £50,000, £30,000 and £20,000 apply to each individual taxpayer.
Therefore, in this example, £25,000 gross rental income between two joint owners yields a figure of £12,500 gross annual rental income each. As this is lower than £20,000 you will not be captured by MTD rules at all under current guidance.
My income in the 2024-2025 tax year is going to be much higher than in future years. What if my total income is above £50,000 in 2024-2025 but in the future drops below this figure? Can I then opt out of MTD on that basis?
To avoid confusion for individuals whose income fluctuates around the mandatory thresholds, once you meet the threshold for MTD, you must comply with MTD rules for a period of 3 tax years.
Therefore, in this example, if your total gross income in 2024-2025 is over £50,000, you will be required to file quarterly MTD returns and keep digital records from 6 April 2026 onwards, for a period of 3 years.
If your total gross income falls below the thresholds in future years, you can then de-register once you are below the MTD threshold for 3 consecutive tax years.
We note that there is an exemption from having to sign up for MTD if that person is digitally excluded (i.e. if there is any reason that makes it impractical for them to use electronic communications or to keep electronic records). This will be a difficult test to pass, therefore MTD will apply to the vast majority of taxpayers.
What if my total income goes above the MTD threshold for the first time in the middle of a tax year, say in 2026/2027? When will I need to sign up for MTD?
If your total income exceeds the MTD thresholds for the first time after April 2026, say part way through the 2026-2027 tax year, then you will need to sign up to MTD from April 2028 onwards. The legislation on this may change once Phase 1 of MTD is implemented, therefore we will assess your eligibility for mandatory MTD sign up on an ongoing basis.
What if there are errors in my quarterly returns? Can I correct any errors in the next filing quarter?
The quarterly updates sent to HMRC under MTD will be cumulative. Therefore, any errors identified by taxpayers from previous quarters can be corrected in the next quarterly filing.
Why are HMRC implementing MTD? What is the point?
During the Covid-19 pandemic, it became clear that HMRC did not have up to date financial information on their taxpayers, and this led to significant sums of money (in the form of grants/Covid support packages) being paid to individuals who had ceased trading (i.e. to those who technically should not have been eligible) and so since emerging from the pandemic, HMRC have accelerated the implementation of MTD.
In future crises, HMRC will have much more accurate financial information on taxpayers, closer to a 'real-time' basis.
What type of penalties will HMRC apply if I do not file quarterly updates or miss the filing deadline?
HMRC are introducing a new penalty regime from April 2026. A points-based system will be introduced for late filing. Where an individual misses a quarterly or annual submission obligation, they will receive a penalty point. Once the taxpayer reaches the points threshold of 4 points, they will receive a financial penalty.
