Making Tax Digital for Income Tax: what to do in 2026

Start with the right question: are you in scope?

Making Tax Digital for Income Tax is not a rule for every sole trader, every landlord or every company. HMRC says it applies when an individual is registered for Self Assessment, has self-employment income or property income (or both), and has qualifying income above the relevant threshold. For the first 2026/27 cohort, the comparison is against qualifying income over £50,000 in the 2024/25 tax year.

Qualifying income means the total income from self-employment and property before expenses. That is a different number from your profit, your taxable income, the money in your bank account or your total income from employment, dividends and savings. A self-employed designer with £65,000 of trading income and £45,000 of costs may have a much lower profit, but the £65,000 is the figure that matters for this threshold. Conversely, a person with a salary plus small self-employment income should not assume their salary is added to this specific qualifying-income test.

HMRC’s current timetable says people above £50,000 for 2024/25 should use the service from 6 April 2026, people above £30,000 for 2025/26 will need to use it from 6 April 2027, and people above £20,000 for 2026/27 will need to use it from 6 April 2028. The thresholds and start dates are current guidance, not a personal determination. Check the official tool if your circumstances, income sources, residence or exemption position are unusual.

What actually changes during the year

The practical change is record-keeping and reporting cadence. You use functional compatible software to create, store and correct digital records of relevant income and expenses, send quarterly updates, and submit the final return. HMRC’s step-by-step guidance says that HMRC does not provide the software itself, so choosing a package or working method with your agent is a real preparation task rather than an administrative afterthought.

A quarterly update is a summary of information for the relevant period; it is not a fourth of a final tax calculation and it does not turn every three months into a tax-payment deadline. You still need the year-end process to finalise the information in your return, add other income and gains where relevant, and pay tax by the normal deadline. The useful mindset is ‘keep the records current enough to report’, not ‘try to guess the final tax bill four times a year’.

Under the 2026 Regulations, the standard non-calendar reporting periods end on 5 July, 5 October, 5 January and 5 April, with quarterly-update deadlines of 7 August, 7 November, 7 February and 7 May respectively. A calendar-quarter election has different period end dates while retaining the corresponding 7th-of-the-following-month deadlines. Do not pick a method because it sounds neater: ask your software provider or agent how it will be configured and keep the choice documented.

Digital records are more than a scanned shoebox

The regulations require records of the financial information needed for quarterly updates and the return, with the underlying item details, amounts and dates received or incurred. A photograph of a receipt may be useful evidence, but it is not by itself a complete operating process. You need a reliable way to connect invoices, bills, bank transactions and corrections to the right income source and period.

For a straightforward sole trader, that may mean one feed-connected business account, a consistent chart of categories, a weekly receipt habit and a reconciliation before each update. For someone with trading and property income, multiple businesses, joint property or a recent cessation, the setup can be more complex. Make a list of every income source before you select software, because the sign-up service asks you to check self-employment and property sources and add missing ones.

Do not wait for a deadline to discover that invoices were raised from one app, costs were paid through two cards and rental income was logged in a spreadsheet nobody can reconcile. Build the process from the source documents outward: what was earned, what was spent, when it happened and where the evidence sits.

How to prepare without overcomplicating it

First, save a copy of the Self Assessment return that HMRC will use for the relevant threshold check and identify the trading and property-income figures before expenses. Second, list every live or recently ceased income source, the records used for it and the person responsible for keeping those records up to date. Third, confirm with your accountant or software provider that the product is compatible with Making Tax Digital for Income Tax and can handle your actual mix of income, VAT position and reporting needs.

Then run a dry month. Reconcile bank movements, attach or store evidence, categorise the transactions and produce the reports you would rely on for a quarterly update. This exposes missing links early. It also gives you time to fix duplicate bank feeds, unclear categories, personal transactions mixed with business spending and overdue invoices recorded as if they were cash received.

If you use an agent, agree who does what. An agent can sign you up, but that does not remove the need for usable records. Decide who captures receipts, who reviews the bank feed, who asks questions about unusual transactions and who presses submit. A vague arrangement is the usual reason the work returns to the owner at the last minute.

Sign-up, exemptions and problems to handle early

HMRC says a person signing up must be registered for Self Assessment and have submitted a return in the last two years. The sign-up process asks about the start date of a business or property income where relevant, the tax year in which the service will start, and source-specific details. You may be asked to confirm identity. If an income source has ceased, deal with that rather than leaving it to be picked up from an old return.

There are exemptions, including digital-exclusion routes, but an exemption is not something to assume because a new system is inconvenient. HMRC has a separate exemption process and says exempt people continue to report through Self Assessment. Use the official guidance or a suitably qualified adviser if an exemption, overseas position, jointly owned property or cessation affects you.

For 2026/27, HMRC says it will not apply late-quarterly-update penalty points to people required to use the service from 6 April 2026. That is not permission to ignore dates: late returns and late tax payment can still have consequences, and the intended benefit of the first year is to get the record-keeping process right before a deadline creates pressure.

Keep tax planning separate from the submission process

Making Tax Digital does not calculate a safe amount for you to spend. Continue to maintain a tax reserve and a short cash forecast. The quarterly update can make income and expenses more visible, but the final liability may depend on other income, allowances, payments on account, adjustments and information that is not resolved by a mid-year total.

Use your accounting data to ask better questions: has income risen, are costs missing evidence, is a customer invoice overdue, and is the reserve being protected? Do not use an early quarterly figure as a promise of the final bill or as a reason to drain the tax pot. If you are worried about paying an upcoming bill, contact HMRC early and take advice before the deadline rather than treating a credit product as a tax-payment plan.

What to do, in order

1. 1

   Check the relevant Self Assessment return

   Identify your self-employment and property income before expenses for the tax year HMRC says it will use. Keep the return and supporting reports together.

2. 2

   Use HMRC’s checker and read the applicable start date

   Do not infer eligibility from turnover, profit or a general headline. Check whether the service applies, when it starts and whether an exemption question needs attention.

3. 3

   Map income sources and record flow

   List trades, property income, ceased sources, bank accounts, invoice systems and document locations before moving data into software.

4. 4

   Confirm software and agent responsibilities

   Ask the provider or agent whether the software is compatible and agree who records, reviews, corrects and submits information.

5. 5

   Rehearse one reporting cycle

   Reconcile a complete period, resolve unclear transactions and produce the information you would rely on before the first live update is due.

6. 6

   Keep the tax reserve and final-return work separate

   Use the data to improve planning, but do not mistake a quarterly update for a final tax calculation or payment confirmation.