Making Tax Digital for Income Tax

HMRC are introducing a new regime called Making Tax Digital for Income Tax (MTD for ITSA) from April 2026. The changes will affect unincorporated sole traders and landlords and will alter how income information is reported to HMRC.

While reporting obligations will become more frequent, the timing of tax payments will broadly remain the same. Most taxpayers will still pay income tax once or twice a year, in line with the current self-assessment system.

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What Is Making Tax Digital for Income Tax?

If you are an unincorporated sole trader or landlord with combined qualifying turnover of £50,000 or more, you will be required to submit income records to HMRC on a quarterly basis using HMRC-approved software.

From April 2027, the regime will be extended to include unincorporated sole traders and landlords with turnover of £30,000 or more.

What Will Change Under MTD?

Quarterly Submissions

Income records will need to be submitted quarterly rather than once per year. From April 2026, the submission deadlines will be:

• 7 August
• 7 November
• 7 February
• 7 May

At the end of the tax year, a final tax declaration must be submitted by 31 January following the end of the tax year. Adjustments can be made at this stage. This final declaration will replace the current annual self-assessment tax return.

As with the existing system, tax will usually still be paid once or twice a year.

HMRC-Compatible Software

From April 2026, taxpayers within the MTD regime will only be able to submit information to HMRC using approved software. Manual submissions outside approved systems will no longer be permitted.

How Do I Know If I Am Affected?

If your 2024/25 self-assessment tax return (submitted by 31 January 2026) shows qualifying turnover of more than £50,000, HMRC will contact you to confirm that you must comply with Making Tax Digital from 6 April 2026.

If your combined turnover from property and/or self-employment is below £50,000, you will not be required to comply from April 2026. However, all unincorporated sole traders and landlords with turnover exceeding £30,000 will fall within the regime from April 2027.

HMRC may also issue ‘pre-mandation’ letters from April 2025 where they believe taxpayers are likely to fall within the new regime. An online checker tool is available to confirm whether you qualify.

What Happens If I Do Not Comply?

Making Tax Digital is mandatory. If you are required to submit quarterly updates, you will no longer be able to file using the annual alternative method.

HMRC will operate a points-based penalty system. Once a specified number of points is reached, an automatic £200 fine will be issued. Points can arise from both late submissions and late payments and remain valid for two years.

Following a penalty, HMRC requires a 12-month period of full compliance before points are removed. A one-off fine may also apply where compatible software is not used.

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How We Can Help

Making Tax Digital represents a significant change for many sole traders and landlords. Early preparation can help ensure compliance, reduce disruption, and avoid penalties. If you would like support with software selection, record-keeping, or quarterly submissions, please contact us.

DAS Accounting Services UK
105 Eade Road, OCC Building A, Second Floor, Unit 11a, London, N4 1TJ
uk@dasaccounting.com • 020 8396 7353