Making Tax Digital: What Self-employed Workers and Landlords Need to Know

2/23/20264 min read

If you're self-employed or a landlord in the UK, a major change is coming to how you report your income to HMRC. Here's everything you need to know about Making Tax Digital for Income Tax.

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's biggest shake-up to the self-assessment system since it launched over 30 years ago. The aim is to modernise tax reporting by moving from annual paper returns to digital record-keeping with quarterly updates.

In simple terms, instead of gathering all your receipts at the end of the tax year and filing one annual return, you'll need to keep digital records throughout the year and send HMRC updates every three months.

When Does It Start?

MTD for Income Tax is being introduced in phases based on your income:

Your Gross Income When You Must Start Over £50,000 6 April 2026 Over £30,000 6 April 2027 Over £20,000 6 April 2028

Important: This is based on your gross income from self-employment and/or property combined — that's your turnover before expenses, not your profit.

So if you're a self-employed tradesperson earning £55,000 in sales, or a landlord receiving £52,000 in rent across your properties, you'll need to be ready by April 2026.

What Counts Towards the Threshold?

Your "qualifying income" includes:

Gross income from self-employment (your turnover)
Rental income from UK and overseas property

It does not include:

PAYE wages from employment
Dividends
Pension income
Investment income

If you have income from both self-employment and property, these are added together. For example, if you earn £30,000 from freelance work and £25,000 from a rental property, your combined qualifying income of £55,000 means you'll need to join MTD in April 2026.

What Will You Need to Do?

Under MTD for Income Tax, there are three main requirements:

1. Keep Digital Records

The days of shoeboxes full of receipts are over. You'll need to use MTD-compatible software to record all your business income and expenses digitally. This could be an app on your phone, accounting software on your laptop, or even a spreadsheet connected to HMRC through "bridging software."

2. Submit Quarterly Updates

Instead of one annual tax return, you'll send HMRC a summary of your income and expenses every three months. The deadlines are the 7th of the month after each quarter ends:

Quarter 1 (April – June): Due 7 August
Quarter 2 (July – September): Due 7 November
Quarter 3 (October – December): Due 7 February
Quarter 4 (January – March): Due 7 May

3. Submit a Final Declaration

After the tax year ends on 5 April, you'll still need to submit a final declaration by 31 January. This replaces your current self-assessment return and is where you'll include any other income, claim reliefs, and finalise your tax bill.

What Software Will You Need?

You'll need to use software that's compatible with MTD. HMRC won't be providing their own free software for MTD Income Tax — you'll need to choose from commercial options.

The good news is there's a range of choices from free basic tools to full accounting packages. Popular options include QuickBooks, Xero, FreeAgent, and various bridging software if you want to keep using spreadsheets.

HMRC maintains a list of compatible software on their website.

What Happens If You Miss a Deadline?

HMRC is introducing a new points-based penalty system:

Each missed quarterly update earns you one penalty point
Once you hit a threshold (typically 4 points), you'll receive a £200 penalty
Further missed deadlines add more penalties

Good news for early adopters: If you're joining MTD in April 2026, HMRC has confirmed there will be no penalty points for late submission of your first four quarterly updates. This "soft landing" gives you time to get used to the new system — but it only applies to the first cohort of taxpayers, not those joining in 2027 or 2028.

Who is Exempt?

You may be able to apply for an exemption if:

You're a practising member of a religious society whose beliefs are incompatible with using electronic communications
For reasons of age, disability, or location, it's not reasonably practicable for you to use digital tools
There are other circumstances that make digital compliance unreasonable

If you think you might qualify, you'll need to apply to HMRC.

What About Partnerships?

Partnerships are not currently included in MTD for Income Tax. HMRC has said they'll be brought in at a later date, but no timeline has been announced yet.

However, if you're a partner in a partnership and you have other self-employment or property income that exceeds the threshold, you may still need to comply with MTD for that separate income.

What Should You Do Now?

If your income is over £50,000, April 2026 isn't far away. Here's how to prepare:

Check your qualifying income — Look at your 2024/25 tax return (or estimate your current year) to see which threshold applies to you
Start keeping digital records now — Even if you're not required to join MTD yet, getting into good habits now will make the transition easier
Research software options — Start looking at MTD-compatible software and consider trying a few to see what suits you
Sign up early — HMRC's testing programme is open, and signing up before the deadline gives you access to dedicated support
Talk to your accountant — If you use an accountant or bookkeeper, have a conversation about how you'll work together under MTD

How SnapBook Partners Can Help

Making Tax Digital doesn't have to be stressful. As a local accountant based in Hastings, I help self-employed workers and landlords across East Sussex get their finances sorted — without the headache.

Whether you need help choosing the right software, setting up digital record-keeping, or managing your quarterly submissions, I'm here to make the transition as smooth as possible.

Got questions about MTD? Get in touch for a friendly, no-obligation chat.

This article was last updated in February 2026. Tax rules can change, so please check the latest guidance on GOV.UK or speak to a qualified accountant for advice specific to your situation.