Making Tax Digital for Income Tax is no longer something to prepare for. It started on 6 April 2026, and sole traders and landlords with gross income over £50,000 are already in it. The second quarterly update falls due tomorrow, 7 November 2026, and only about half of the roughly 864,000 people in scope filed the first one. This guide explains who must use MTD, what the quarterly updates involve, what happens if you miss a deadline, and what to do this week.
What Making Tax Digital for Income Tax Actually Is
Making Tax Digital (MTD) is HMRC’s programme to move tax reporting from paper records and one annual return to digital records and updates through the year. MTD for Income Tax — MTD ITSA — is the bigger change: it replaces the once-a-year Self Assessment return for sole traders and landlords with digital record-keeping, four quarterly updates and a final declaration.
The change is mandatory for everyone in scope. It does not change how much tax you pay, or when — tax is still due on 31 January and 31 July. What changes is how often you report: records are kept digitally as you go, with a summary to HMRC every three months and a final declaration by 31 January.
Who Has to Use It — and When
MTD for Income Tax is phased in by income level, starting with the highest earners. The test is qualifying income: combined gross income from self-employment and property, before expenses — turnover, not profit. Employment income, pensions and dividends do not count.
| Must use MTD from | If your qualifying income is over | Based on the tax return for |
|---|---|---|
| 6 April 2026 | £50,000 | 2024/25 |
| 6 April 2027 | £30,000 | 2025/26 |
| 6 April 2028 | £20,000 | 2026/27 |
The gross-income point catches people out. Turnover of £55,000 with profit of only £20,000 is still in scope — £55,000 is the figure HMRC looks at. A landlord with £30,000 of rent and a trader with £25,000 of turnover is also in scope, because the two are added together. HMRC writes to people it believes must join, but the duty to check is yours even if no letter arrives.
Limited companies are not covered — MTD applies to individuals only, so a director reports through corporation tax; our guide to corporation tax marginal relief for small companies explains the rates there. Partnerships will join later.
The Three Things You Must Do
Once you are in scope, MTD gives you three obligations. First, keep digital records of all business and property income and expenses in MTD-compatible software. Second, send HMRC a quarterly update for each income source, four times a year. Third, after the tax year ends, submit an End of Period Statement for each source and a final declaration, by 31 January.
HMRC provides no free filing tool. FreeAgent, Xero, QuickBooks and Sage all have compatible products, and HMRC’s GOV.UK list includes free products for simple affairs. You can keep a spreadsheet, but only if it is linked to HMRC through approved bridging software — a spreadsheet alone does not meet the rules.
Quarterly Update Deadlines for 2026/27
Each quarterly update is cumulative, covering the tax year from 6 April — not just the latest three months. Deadlines fall about a month after each quarter ends.
| Update | Period covered | Deadline |
|---|---|---|
| 1 | 6 April to 5 July | 7 August |
| 2 | 6 April to 5 October | 7 November |
| 3 | 6 April to 5 January | 7 February |
| 4 | 6 April to 5 April (the whole year) | 7 May |
The deadline that matters now is 7 November 2026 — tomorrow. That update covers 6 April to 5 October, so it catches up a missed August update. Calendar quarters are allowed instead (for example 1 April to 30 June), but the deadlines stay the same, and a quarter with no income still needs a nil update.
What Goes in a Quarterly Update
A quarterly update is a short summary, not a mini tax return. Your software adds up your digital records into totals per income and expense category, aligned with the Self Assessment categories, and sends those totals to HMRC. It does not calculate your tax bill or ask for receipts, so once your records are digital the update is quick.
The benefit is visibility: you see year-to-date income and expenses four times a year, so a tax bill building up is harder to miss. Tracking the right cash-flow KPIs alongside your quarterly figures turns that visibility into a planning tool.
What Happens If You Miss a Deadline
From 2027/28, each missed quarterly update or tax return deadline earns one penalty point — only one per deadline, even with more than one business. At four points you get a £200 penalty, then £200 per further miss.
For this first year, GOV.UK states: “There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year.” Updates are still required before you can file your return, but a late update this year earns no point. From 2027/28, it does. A late tax return was never covered: for 2026/27 it is due by 31 January 2028.
Late payment is separate: nothing is charged if tax is paid within 15 days (30 days in your first year), then 3% at day 15, a further 3% at day 30, and 10% a year from day 31 — 4% and 4% from 2027/28. Late payment cuts both ways: if your own customers pay late, our guide to charging interest on late payments explains your rights.
One more deadline is easy to forget: your 2025/26 return is filed the old way, due by 31 January 2027, and it decides whether you join from April 2027.
What to Do This Week
If you are in scope and have not filed anything yet, these steps take an afternoon, not a month.
- Check whether you are in scope. Add your gross self-employment and property income from your 2024/25 return: over £50,000 means you should already be using MTD.
- Sign up on GOV.UK. You must be registered for Self Assessment with a return submitted in the last two years; your agent can sign you up.
- Pick compatible software today. Check HMRC’s recognised-software list, confirm it covers your business and property income, and connect your bank feed.
- Bring records up to date. Enter income and expenses from 6 April; if your records are in a spreadsheet, link it through bridging software.
- Send the 7 November update. It covers 6 April to 5 October and catches up a missed August update — send it even if figures are incomplete.
- Set aside tax monthly. Use the year-to-date totals to estimate the bill and move a fixed percentage into a separate account — our guide to improving cash flow shows how.
- Diarise the remaining dates. 7 February and 7 May for the next updates, 31 January 2027 for your 2025/26 return, 31 January 2028 for the 2026/27 final declaration.
Mistakes That Catch Small Businesses Out
The most common mistake is testing profit instead of turnover — qualifying income is gross, before expenses. The second is assuming a spreadsheet is enough: without bridging software it does not meet the digital-records rule. The third is waiting for HMRC’s letter — the duty does not wait for it. The fourth is treating the 2026/27 waiver as a reason to do nothing: updates are still required before you can file, and the points start in 2027/28. The fifth is forgetting a second income source: it needs its own updates too.
What Changes in 2027 and 2028
The thresholds fall twice more. From 6 April 2027, anyone over £30,000 joins (2025/26 return); from 6 April 2028, the threshold drops to £20,000 (2026/27 return). That pulls in hundreds of thousands of smaller traders and landlords. If your gross income is between £20,000 and £50,000, start keeping digital records now, while there is no deadline pressure, rather than in spring 2027 or 2028 when everyone else is doing the same. The points system becomes fully live from 2027/28, so build the filing habit before the soft landing ends.
Frequently Asked Questions
I am a limited company director. Does MTD apply to me?
No. It applies to individuals — sole traders and landlords registered for Self Assessment. A limited company reports through corporation tax, and salary and dividends from your company do not count towards the qualifying figure.
I missed the 7 August update. Am I in trouble?
Not this year. There are no penalty points for late quarterly updates in 2026/27, and the 7 November update is cumulative, so it brings your records up to date. From 2027/28, though, a missed update earns a point.
Do I pay tax every quarter now?
No. Quarterly updates are reports, not payments — you still pay income tax on 31 January and 31 July. This article is general information, not tax advice; take professional advice on your own circumstances.
Related reading
If you run a limited company, read our guide to corporation tax marginal relief for small companies. For the cash-flow side, see our guides to cash-flow KPIs and improving cash flow. And if late payment is a problem, our guide to charging interest on late payments explains what you can claim.