Making Tax Digital (MTD) for Income Tax is the biggest change to Self Assessment in decades. If you’re self-employed or a landlord above the income threshold, you must keep digital records and send HMRC quarterly updates using compatible software, as well as a final declaration after the year ends.
Who has to join, and when
| Start date | Qualifying income over | Based on your |
|---|---|---|
| 6 April 2026 | £50,000 | 2024/25 tax return |
| 6 April 2027 | £30,000 | 2025/26 tax return |
| 6 April 2028 | £20,000 | 2026/27 tax return |
HMRC reviews your Self Assessment return for the relevant year and writes to you if you need to join.
What counts as qualifying income?
Qualifying income is your gross income (turnover) from self-employment and property, before expenses. It isn’t profit, and it doesn’t include employment income, pensions, savings or dividends.
So a freelancer with £55,000 of sales and £30,000 of costs (£25,000 profit) has qualifying income of £55,000, and must join MTD from April 2026 if those were their 2024/25 figures. Someone earning £80,000 from a job plus £10,000 of rent has qualifying income of £10,000, and doesn’t need to join yet.
If you have both self-employment and rental income, they’re added together.
What you’ll have to do
- Keep digital records of income and expenses, in MTD-compatible software or spreadsheets connected with bridging software.
- Send quarterly updates: a summary of income and expenses for each quarter, within about a month of the quarter ending. Quarters follow the tax year (to 5 July, 5 October, 5 January and 5 April), or calendar quarters if you choose.
- Submit a final declaration by 31 January after the tax year. This replaces the Self Assessment return and is where you add other income and make adjustments.
What doesn’t change
- Payment dates. You still pay on 31 January and 31 July (balancing payment and payments on account).
- Tax rates and allowances, including Class 4 NI.
- Expenses you can claim.
Quarterly updates aren’t tax bills. They give you, and HMRC, an estimate of your liability as the year goes on, which can help with budgeting.
Penalties
MTD uses a points-based penalty system for late submissions. Each missed quarterly update earns a point, and a £200 penalty applies when you reach the threshold of 4 points (for quarterly filers). Points expire after a period of compliance. There’s a soft-landing period for quarterly updates in the first year.
How to prepare
- Check your qualifying income from your latest tax return.
- Choose software from HMRC’s list of compatible products. Free options exist for simple businesses.
- Separate business finances with a dedicated bank account, which makes digital records much easier.
- Start keeping digital records now, even before you’re required to.
- Consider an accountant or agent, who can submit on your behalf.
Estimate your bill
If you also have a job, check your PAYE side with the take-home pay calculator. Our self-employed tax calculator works out your Income Tax, Class 4 NI and payments on account, and tells you which MTD start date applies to your turnover.
Common questions
Does Making Tax Digital change how much tax I pay?
No. Rates, allowances and payment dates are unchanged. Only record-keeping and reporting change. See payments on account.
Is it based on turnover or profit?
Turnover (gross income) from self-employment and property combined, not profit.
Can I use a spreadsheet?
Yes, if you link it to HMRC with MTD-compatible bridging software.
Does it apply if I also have a job?
Employment income isn’t counted. Only self-employment and property income count towards the threshold. Estimate your bill with the self-employed tax calculator.
This guide is general information, not financial or tax advice.