Do I have to use Making Tax Digital for Income Tax now?

21 September 2026

Yes, if you're a sole trader or landlord registered for Self Assessment and your self-employment and property income before expenses was over £50,000 in the 2024 to 2025 tax year, you've had to use Making Tax Digital for Income Tax since 6 April 2026.

The good news, if you haven't started yet, is that HMRC's own guidance says there are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year. Points-based penalties for late quarterly updates begin with the tax year starting 6 April 2027.

That isn't a reason to leave it, though. From September 2026 HMRC has been signing people up automatically, whether or not they've acted. So you have roughly a year to get used to it without it costing you money.

How do I know if I'm in scope?

It was decided by a tax return you've already filed. You're in now if you're registered for Self Assessment, have self-employment or property income, and your qualifying income was over £50,000 in the 2024 to 2025 tax year.

"Qualifying income" is the phrase that catches people out. HMRC defines it as "your total income from self-employment and property. This is the amount before expenses (also known as turnover)." Before expenses. A landlord with £55,000 of rent and £30,000 of mortgage interest, agent fees and repairs is in scope, even though the taxable profit is nowhere near £50,000.

What counts: self-employment, plus UK and foreign property income if you're UK resident. What doesn't: employment income through PAYE, dividends (including those from your own company), the State Pension, private pensions, and your share of partnership profits.

There's no in-year assessment. HMRC decides by checking the Self Assessment return you submitted in the previous tax year - for this first group, the one filed by January 2026 covering the year to April 2025.

Partnerships are out entirely, as are trusts, personal representatives of people who have died, non-resident companies, and anyone with qualifying income of £20,000 or less. Those exemptions are automatic, so you don't need to apply.

What do the quarterly updates involve?

Less than most people fear. There are two parts: keep digital records, and send quarterly updates.

A digital record is simply one line per transaction, kept in software rather than on paper, carrying three things - the amount, the date the income was received or the expense incurred, and the category. Spreadsheets still count, as long as they link to software that can file. You also carry on keeping the original receipts and documents as before. The digital record doesn't replace them.

The quarterly update is much lighter than "four tax returns a year" makes it sound. It's "totals for each income and expense category you've used", counted from the start of the tax year, and HMRC says plainly that "you do not need to make any accounting or tax adjustments before sending a quarterly update". Think of it as a running tally on a scoreboard rather than a final result. It settles nothing.

The standard deadlines are fixed:

the quarter to 5 July is due by 7 August
the quarter to 5 October is due by 7 November
the quarter to 5 January is due by 7 February
the quarter to 5 April is due by 7 May the following year

If you'd like those four dates to arrive as reminders a few weeks ahead, we're happy to set up an automation that sends them.

The real change is keeping records up to date all year

Four filings instead of one is four times the rhythm, and the real work isn't pressing the button. It's that your records now need to be current within about a month, all year round, rather than pieced together in a fortnight each January. For a lot of small businesses, that's the actual change.

This is also where automation genuinely helps. Much of the effort is routine: photographing receipts, finding the invoice that matches a payment, copying figures from one place to another. If chasing and gathering those records every quarter is the painful part, we're happy to set up an automation that collects receipts and moves transactions into the software you use, so the information is there when you or your accountant need it.

Has the annual tax return gone away?

No. You still submit a tax return by 31 January following the end of the tax year. That's where everything the quarterly updates leave out goes: savings interest, dividends, partnership profit shares, payrolled benefits in kind, and all the adjustments and reliefs.

So the accurate description isn't "Self Assessment has been replaced by quarterly filing". Self Assessment is still there, with four summaries added in front of it, and it now has to be completed and submitted through your Making Tax Digital software rather than on HMRC's website.

What software do I need, and what does it cost?

You need software HMRC recognises - able to create, store and correct digital records, send the quarterly updates, and submit the return by 31 January.

If you already keep records in a spreadsheet, "bridging software" counts. It works like a travel adaptor: your spreadsheet stays as it is, and the bridging software lets it plug into HMRC's system. HMRC says free products exist "for those with simple tax affairs but there may be limits on how the product can be used", so it's safest to treat free software as a possibility rather than a plan.

HMRC's own impact assessment puts the one-off cost of getting set up at an average of £285 per business for those above the £50,000 threshold, with £115 a year after that. Those are the government's own figures.

How do the penalties work?

There are two separate systems, and they're easy to confuse.

Late filing is points-based. You get a penalty point for each missed quarterly update (for tax years after 2026 to 2027) or each missed tax return deadline. At four points you get a £200 penalty, and another £200 for every missed deadline after that. It's one point per deadline, even if you run several businesses and file several updates late. Below four points, each point is removed automatically 24 months after the missed deadline. Once you've reached four, clearing them takes twelve months of filing everything on time, plus submitting anything outstanding from the previous 24 months.

Late payment applies to the tax itself, not the filing. Nothing for the first 15 days. From day 16 to 30, for the 2026 to 2027 tax year, it's 3% of the tax owed at day 15 - HMRC's table adds "or no penalty if it's your first year". From day 31, it's that 3% plus a further 3% of the amount owed at day 30, and then 10% a year charged daily on what's still outstanding. Those percentages rise to 4% for the 2027 to 2028 tax year.

HMRC's own figures for how many people are affected don't match

HMRC's policy paper estimates "around 780,000 people with business or property income over £50,000" joining from April 2026. A press release two months before launch said "more than 860,000 sole traders and landlords need to start using digital tax reporting from 6 April". The policy paper was last updated about five months before that press release, so the larger figure is probably the more recent estimate, but HMRC hasn't reconciled the two and neither should be treated as precise.

Against either number, on 12 August 2026 HMRC reported that 436,000 people had submitted a first quarterly update, and over 570,000 had signed up in total. That leaves a sizeable group who are legally in scope and haven't done anything yet, which is why HMRC has started enrolling people itself.

What should I do next?

If you've had a letter, or found yourself signed up in your HMRC online account, catching up is real work but not dramatic. Check the income sources HMRC has listed against you, get software, create digital records back to 6 April 2026, and file the updates you've missed. This tax year, that won't cost you anything in penalties.

If you've heard nothing, look at the turnover line - not the profit - on your 2024-25 return. If self-employment and property together come to over £50,000, you're in scope now, letter or no letter.

If you genuinely can't use software, there's a digital exclusion exemption, and you have to apply for it. HMRC says it won't accept previous paper filing, unfamiliarity with software, having very few records, or cost and time on their own as reasons.

If you're below £50,000, this is a note for your diary rather than a job for now. £30,000 brings you in from April 2027 and £20,000 from April 2028, each measured on the return for the tax year two years earlier.

For the tax side itself, your accountant or HMRC is the right place to go. Where we can help is the routine work around it. If you'd like receipts, bank transactions and deadline reminders handled by automation so your records stay current without the quarterly scramble, we're happy to set that up. You can read more about the kind of automation we build for small businesses, and it's worth doing before next April rather than in the week the penalties start.

Sources

Checked against the above on 21 September 2026. Penalty rates, thresholds and the software market all change; if you are reading this later, verify the dates and percentages before relying on them.

The next step

The cost of waiting is not zero.

Somewhere in your market, a business the same size as yours has stopped writing follow-ups by hand. They are quoting faster than you, chasing money you are still chasing manually, and starting Monday already knowing where they stand. That gap does not stay the same size.

Half an hour on the phone. You describe your week, we tell you honestly which parts of it are worth automating and which are cheaper left alone. No pitch, and nothing to sign - you decide whether you want to take it further.

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