- Who is in: sole traders and landlords with qualifying income over £50,000 (from 6 April 2026), over £30,000 (from 6 April 2027) and over £20,000 (from 6 April 2028).
- Qualifying income means gross self-employment plus gross property income, before expenses. The 2025/26 return decides who joins in April 2027.
- What you do: keep digital records, send 4 quarterly updates (due 7 August, 7 November, 7 February and 7 May) and submit your tax return from software by 31 January.
- Penalties: no points for late quarterly updates in 2026/27. From 2027/28 each missed deadline earns a point, and 4 points cost £200.
- Software: HMRC doesn’t provide any. Some free business accounts include it, but not all of them can file the year-end return yet.
This page is for UK sole traders and landlords who want to know whether Making Tax Digital for Income Tax (MTD) applies to them, from when, and what it involves. It is also the starting point for every TillRadar guide on MTD.
By the end you’ll know which tax return sets your start date, how to add up your qualifying income, which deadlines and penalties apply, what free bank software does and doesn’t do, and what to do before April 2027. It summarises HMRC’s guidance and isn’t personal tax advice. If your situation is unusual, speak to an accountant.
When does Making Tax Digital for Income Tax start for you?
MTD for Income Tax is a new way of doing Self Assessment, and it is being phased in over three years. HMRC checks the qualifying income on a return you have already filed. If that figure is over the threshold, you start on the next 6 April.
MTD for Income Tax thresholds
Qualifying income must be more than the figure shown
| Return checked | Qualifying income | MTD starts | First update due | First MTD tax return due |
|---|---|---|---|---|
| 2024/25 | over £50,000 | 6 April 2026 | 7 August 2026 | 31 January 2028 |
| 2025/26 | over £30,000 | 6 April 2027 | 7 August 2027 | 31 January 2029 |
| 2026/27 | over £20,000 | 6 April 2028 | 7 August 2028 | 31 January 2030 |
The return that matters now is 2025/26, which is due by 31 January 2027. If you’re close to the line, read how HMRC counts the £30,000 threshold. HMRC writes to people whose return puts them over a threshold. Its guidance says it is still your job to check if no letter comes. For the year before you join, you file a normal Self Assessment return. Partnerships aren’t covered yet, and HMRC says it will give their timeline later.
What counts as qualifying income?
Qualifying income is your total income from self-employment and property before expenses, meaning turnover rather than profit. You add up every business and every property you have. HMRC takes the figures from the return you submitted in the previous tax year.
Some income doesn’t count: PAYE employment income, your share of a partnership’s profit, dividends (including from your own company), State Pension and private pensions, and income from UK REITs or PAIFs.
For a jointly owned property, only your share of the rent counts, as explained in MTD for landlords with joint property. If you started trading part-way through a year, HMRC annualises a sole trader’s turnover, so 6 months’ trading is doubled. Landlords have to do this sum themselves. If you use the cash basis and are VAT-registered, VAT counts only if you include it in your income.
- Self-employment turnover (painter and decorator, 2025/26)
- £22,500
- Half share of rent from a jointly owned flat (£15,600 ÷ 2)
- £7,800
- Part-time PAYE job, £9,000 (does not count)
- £0
- Decorating profit, £14,000 (not used)
- n/a
Qualifying income: over £30,000, so MTD from 6 April 2027£30,300
Profit plays no part: turnover plus the rent share comes to £300 over the threshold. A sole trader with £28,000 turnover and a £40,000 salary would stay out in April 2027. They would be in from April 2028 if their 2026/27 turnover is over £20,000.
If all your self-employment and property income stopped before 6 April 2026, you don’t need MTD. You must tell HMRC, though, or it may sign you up based on old figures. If one source has stopped but another continues, the stopped one still counts.
Who is exempt from MTD for Income Tax?
Some exemptions are automatic and others you have to apply for. If you’re exempt, you keep filing an ordinary Self Assessment return. The detail is in MTD exemptions and how to apply.
| Who | Type | How long |
|---|---|---|
| Qualifying income of £20,000 or less | Automatic | Unless income rises |
| No National Insurance number before the tax year starts | Automatic | That tax year |
| Trusts, non-resident companies, personal representatives, Lloyd’s members, people with a power of attorney or deputy in place | Automatic | Permanent |
| 2024/25 return claimed averaging relief or qualifying care relief, or included SA107 or SA109 pages | Automatic | 2026/27 only |
| Ministers of religion, Married Couple’s Allowance (born before 6 April 1935), Blind Person’s Allowance | Automatic | Until HMRC sets a date |
| Digitally excluded (age, health, disability, religious beliefs, no internet access) | Apply | While it applies |
HMRC won’t accept a digital exclusion application if your only reason is that you used to file on paper, you’re unfamiliar with software, you have few records, or MTD costs you time or money.
Once you’re in, you can leave if your qualifying income stays below the threshold for 3 tax years in a row. You can also leave if an amended return takes you under it. The opt-out appears in your HMRC online account when you qualify.
What do you have to do under Making Tax Digital?
You still file one tax return a year, and you pay on the same dates as now. What changes is the work during the year.
1. Keep digital records
You record each item of self-employment and property income and each expense in compatible software. Each record needs the amount, the date and a category, using the same categories as Self Assessment. You keep invoices and bank statements as before. Dividends, savings interest and pensions don’t need digital records. If a source has turnover under £90,000, you can use simpler categories. A sole trader then only has to mark each item as income or expense.
2. Send quarterly updates
Quarterly updates are totals, not tax returns, and you don’t pay anything with them. You send one for each sole trader business and one for your property business. Each update is cumulative: the third one covers 6 April to 5 January. That means a correction made now flows into the next update. If nothing happened in a quarter, you still send an update. After each one, your software and HMRC account show an estimate of your tax bill.
3. Submit your tax return from software
After the fourth update, you make your year-end adjustments, such as capital allowances, simplified expenses or private use. Then you add your other income and submit the return from software by 31 January. You may still see this called the “final declaration”. HMRC pre-fills what it already holds, including PAYE pay, pensions and CIS deductions. You add savings, dividends and partnership profit yourself. One catch: HMRC says you can’t claim a refund inside an MTD return, which matters for CIS subcontractors.
What are the quarterly update deadlines for 2026/27?
Software uses standard periods (6 April to 5 April) unless you change it. If your accounts run to 31 March, choose calendar periods, and do it before your first update, because you can’t switch later in the tax year. The deadlines are the same either way.
| Update | Standard period | Calendar period | Deadline |
|---|---|---|---|
| 1 | 6 Apr – 5 Jul 2026 | 1 Apr – 30 Jun 2026 | 7 August 2026 |
| 2 | 6 Apr – 5 Oct 2026 | 1 Apr – 30 Sep 2026 | 7 November 2026 |
| 3 | 6 Apr 2026 – 5 Jan 2027 | 1 Apr – 31 Dec 2026 | 7 February 2027 |
| 4 | 6 Apr 2026 – 5 Apr 2027 | 1 Apr 2026 – 31 Mar 2027 | 7 May 2027 |
| Tax return | Whole tax year, plus other income | 31 January 2028 | |
The April 2027 group follows the same pattern a year later, with the return due 31 January 2029. You can send an update as soon as its period ends. If you know nothing more will come in, you can send it up to 10 days early. See every MTD quarterly update deadline.
What are the penalties under MTD for Income Tax?
When you join MTD, the old penalties for your personal return are replaced by points for late filing and a sliding scale for late payment. Late payment interest doesn’t change.
- Late submissions: you get one point per missed deadline, however many businesses are late. At 4 points you pay £200, and another £200 for each later miss. In 2026/27 late quarterly updates earn no points, but a late tax return still does. You can’t file the return until all four updates are in.
- Clearing points: below the threshold, each point expires after 24 months. Once you reach 4 points, they are cleared only after 12 months of on-time filing with nothing outstanding from the previous 24 months.
- Late payment (2026/27 tax): nothing up to day 15, then 3% of the tax owed at day 15, another 3% at day 30, and 10% a year from day 31. For 2027/28 the two charges rise to 4% each. In your first year you get 30 days to pay or agree a payment plan; after that it’s 15 days.
- Volunteers: no penalties for late quarterly updates, and a 2-point threshold for late returns.
From April 2027, the new penalties apply to everyone filing a personal Self Assessment return. Worked examples are in MTD penalties.
New business account offers, fee changes and deadlines, in one short email.
Which software do you need for MTD?
HMRC doesn’t supply software. Its software finder lists products that have passed its recognition process, without recommending any. Whatever you choose must cover all your MTD income sources, send quarterly updates, add your other income, file the tax return and match your accounting period.
- All-in-one software such as Xero, QuickBooks or FreeAgent creates records from a bank feed, receipt scans or typing, then submits everything. Compare them in Xero vs QuickBooks vs FreeAgent.
- Bridging software connects to your existing spreadsheet and does the submitting. The link has to be digital: once a record has gone to HMRC, you mustn’t copy-paste or retype it. See MTD bridging software.
- Several products are allowed, for example one for a trade and one for a rental. You can only use one product for each submission, and they must work together.
HMRC notes that free products exist for simple affairs but may cap the number of transactions. Prices for three typical profiles are in our MTD software comparison.
Does your business bank account do MTD for you?
Several business accounts now include MTD software. This is what each provider’s own page said on 19 October 2026:
| Account | Software | Quarterly updates | Year-end return | Catch |
|---|---|---|---|---|
| Starling (sole trader) | Accounting Essentials, free | Yes | “Coming soon” | Accounting Plus costs £7 a month until April 2027, then £14 |
| Monzo Business, all plans incl. free Lite | Built in, powered by Sage | Yes | Yes | No accruals basis, VAT filing or accountant access |
| Mettle | FreeAgent included | Yes | Yes | Needs 1+ Mettle transaction a month, or FreeAgent’s fees apply |
| NatWest business account | FreeAgent, free | Yes | Yes | Only while you bank with NatWest |
| Account | Monthly fee | UK transfer out | Paying in cash | Card abroad | Protection |
|---|---|---|---|---|---|
| Starling BankStarling Business Account | FreeNo monthly fee. Bulk Payments add-on £7/month. | FreeNo charge. CHAPS £20. | 0.7% (min £3) at the Post OfficePost Office only. Sole trader annual limit shown as £20k on one page and £100k on another. | FreeNo Starling fee on foreign card spend (Mastercard rate). 0.4% conversion fee on outbound international payments. | FSCS |
| MonzoMonzo Business Lite | FreeLite is free. Pro is £9/month with the first month free; Team from £25. | Free'Sending money within the UK: £0'. | £1.00'£1 per deposit to pay in cash at any PayPoint or Post Office' (fee information v1.16). Per-deposit limits: PayPoint max £300; Post Office sole trader £3,000, Ltd £4,000. | FreeNo fee on foreign-currency card payments. | FSCS |
| Mettle (NatWest)Mettle business account | FreeNo fee. Mettle+ optional at £4/month (quotes). | FreeNot listed as a charge in the fee information document; inferred free. | £2.75£2.75 per deposit at the Post Office. | Not statedForeign card spend fee not listed in the fee document. | FSCS |
| NatWestBusiness Current Account (Standard Charges) | FreeStandard Charges: no monthly charge. Start-ups (trading under 12 months, turnover up to £1m) and full CASS switchers (turnover up to £2m) get 2 years' free everyday banking. | £0.35Per item online/app after free banking ends; £1.00 by phone or branch. | £0.95 per £100 plus £0.95 per manual itemNatWest/RBS counter, Post Office or deposit machine. | 2.75%Non-sterling fee on card payments and cash. | FSCS |
Fees from each provider's published tariff, checked 19 October 2026. Sorted by the monthly fee after any introductory period. Business tariffs change; the provider's own document always prevails.
A bank feed saves typing, but you are still responsible for the records. HMRC says you may need to add the right Self Assessment category to fed-in transactions. Some items won’t appear in full and have to be added by hand, and checking accuracy before each update is your job. The feed also won’t pick up cash takings, sales paid into another account, or the private share of a phone bill.
- Cash-basis sole traders who run almost everything through one account
- Landlords with simple rent and repairs and no accountant
- Anyone who wants no extra subscription and will check the categories each quarter
- Anyone whose tool can’t file the year-end return yet and who has no back-up
- VAT-registered or accruals-basis traders, or anyone with an accountant who needs access
- People whose income comes through several banks, in cash or via marketplaces
FreeAgent accounting software is included free (Mettle says this saves up to £150 a year, based on FreeAgent's lowest tariff) while you make at least one Mettle transaction a month.
- Open a Mettle account, link FreeAgent and make at least one transaction from Mettle each month.
Joining in April 2027? Your checklist
If your 2025/26 qualifying income is over £30,000, work through these steps in order. Each one is covered in more detail in the MTD sign-up guide.
- Add up your 2025/26 turnover. Gross self-employment income plus gross rents (your share if the property is jointly owned) for 6 April 2025 to 5 April 2026. Ignore profit, wages and dividends.
- File the 2025/26 return by 31 January 2027. HMRC uses this return to decide whether you’re in, and you file it the old way. The earlier you file, the more time you have.
- Check the exemptions. Automatic ones need no action. If you’re digitally excluded, you have to apply.
- Choose software before you sign up. HMRC recommends this order. The software has to cover every income source, file the year-end return and suit your accounting period.
- Pick standard or calendar update periods. Use calendar periods if your accounts end on 31 March, and set this before your first update.
- Sign up through HMRC online services with your Self Assessment Government Gateway user ID. You may have to verify your identity with a passport or driving licence in a phone app. Have your trade, business name and address ready, and your start date if it was in the last 2 tax years. HMRC sign-up page.
- Authorise your software and check that it shows the right income sources.
- Start digital records on 6 April 2027, or on 1 April 2027 if you use calendar periods.
- Put the dates in your diary: 7 August 2027, 7 November 2027, 7 February 2028 and 7 May 2028, then the return and balancing payment on 31 January 2029.
You can join for the current tax year to practise. You’ll have to send any updates already missed that year, and you move to the new penalty rules permanently, even if you stop volunteering.
For the April 2026 group, HMRC began signing people up itself from September 2026 if they hadn’t done it. HMRC says that signing up yourself means your income sources are right from the start.
Every MTD guide on TillRadar
- MTD £30,000 threshold: are you in from April 2027?
- MTD quarterly update deadlines 2026/27
- How to sign up for MTD for Income Tax
- MTD exemptions and how to apply
- MTD penalties: points, £200 fines and 2026/27
- MTD software: costs compared, incl. free options
- MTD bridging software for spreadsheets
- Xero vs QuickBooks vs FreeAgent for sole traders
- MTD for landlords and joint property
- MTD for CIS subcontractors
Frequently asked questions
Is Making Tax Digital based on turnover or profit?
Turnover. Qualifying income is gross self-employment income plus gross property income, before expenses. A sole trader with £32,000 of sales and £12,000 of profit on their 2025/26 return must use MTD from 6 April 2027.
Does my salary count towards the MTD threshold?
No. PAYE pay doesn’t count, and neither do dividends, pensions or partnership profit shares. Only self-employment and property income count. You still report your other income on the tax return you send from MTD software.
Do quarterly updates mean I pay tax every quarter?
No. Quarterly updates are summaries, not returns, and you don’t make a payment with them. Tax is paid on the same dates as before, with the balancing payment due on 31 January. Each update shows an estimate of your bill so far.
Can I keep using a spreadsheet for MTD?
Yes, if you use HMRC-recognised bridging software that is digitally linked to the spreadsheet. Once records have gone to HMRC, you mustn’t copy-paste or retype them. You’ll also need a product that can file the year-end return.
What if my qualifying income is £20,000 or less?
You’re automatically exempt and keep filing a normal Self Assessment return. HMRC reviews each year’s return. If a later return shows turnover over £20,000, you’ll have to start MTD from the 6 April after that review.
Do limited companies use MTD for Income Tax?
No. It covers sole traders and landlords registered for Self Assessment. Dividends from your own company don’t count towards qualifying income. If you also let property personally, though, the rent can still bring you in.
What happens if I miss the 7 November 2026 update?
If you’re in the 2026/27 group, you won’t get a penalty point for a late quarterly update this year. You still have to send it, because you can’t file your tax return until all four updates are in. From 2027/28, each missed deadline earns a point.
Sources
- GOV.UK: Find out if and when you need to use MTD for Income Tax (updated 26 March 2026)
- GOV.UK: Work out your qualifying income (updated 11 September 2026)
- GOV.UK: Exemptions from MTD for Income Tax (updated 28 May 2026)
- GOV.UK: Use Making Tax Digital for Income Tax: digital records, quarterly updates, tax return (updated 16 October 2026)
- GOV.UK: Penalties for MTD for Income Tax and for volunteers
- GOV.UK: Sign up for MTD for Income Tax and if HMRC has signed you up
- GOV.UK: Choose the right software (updated 13 July 2026)
- Starling: Making Tax Digital and Starling Accounting
- Monzo Business: Making Tax Digital
- Mettle: FreeAgent and NatWest business account
Checked on 19 October 2026 against GOV.UK guidance and the providers’ published terms. Rules, offers and fees change; HMRC’s guidance and the provider’s own documents always prevail.