Short answer
Starting 6 April 2027, Making Tax Digital (MTD) for Income Tax becomes mandatory for UK sole traders and landlords whose qualifying income from self-employment or property is over £30,000. Then, from 6 April 2028, the threshold drops to over £20,000. If your income already exceeds £50,000, you must comply now. In short, the transition is phased: the more you earn, the sooner you must start. To prepare, check your qualifying income, choose MTD-compatible software, and move your record-keeping to digital from the start of the tax year. Even if you're below the threshold, planning ahead avoids a last-minute scramble.
Who is affected by MTD for Income Tax?
MTD for Income Tax applies to individuals registered for Self Assessment who receive income from self-employment, property, or both. The key factor is 'qualifying income'-broadly, your gross income from these sources before allowable expenses. From 6 April 2026, the threshold is over £50,000, so if your 2024-25 tax return showed income above that, you should already be in the system. For the 2027-28 tax year, the threshold drops to over £30,000, meaning anyone with qualifying income above that level for 2026-27 must start from April 2027. From 6 April 2028, the threshold falls further to over £20,000, extending the requirement to most sole traders and landlords. Those with income below the current threshold are not required to join yet, but voluntary registration is possible.
It's crucial to understand that the thresholds are based on your previous tax year's income, not the current year. For example, if your 2026-27 qualifying income is £35,000, you must start MTD from 6 April 2027, even if your income drops later. HMRC uses your filed Self Assessment return to determine your eligibility, and they may contact you if they believe you need to sign up. If you're unsure about your income level, HMRC's guidance includes examples to help you calculate qualifying income.
- From 6 April 2026: mandatory if qualifying income exceeds £50,000.
- From 6 April 2027: mandatory for income above £30,000.
- From 6 April 2028: mandatory for income above £20,000.
- Voluntary registration is possible even if below the threshold.
What you need to do to comply
Under MTD for Income Tax, you must keep digital records of your income and expenses, send quarterly updates to HMRC, and submit your tax return by 31 January. This requires using software that connects to HMRC's systems. The software must be able to store your records digitally and transmit the updates automatically. Many products are available, and HMRC provides a list of compatible software. You cannot use paper records or spreadsheets that aren't digitally linked.
First, choose MTD-compatible software that suits your business size and accounting needs. Next, set up your digital record-keeping from the first day of your accounting period. This means recording every sale, expense, and other transaction in the software. Then, every quarter, you'll send a summary update to HMRC-these updates are due within one month after the quarter ends. At the end of the year, you'll submit your final tax return and pay any tax owed. If you use an accountant or agent, they can handle this for you, but you must authorise them to act on your behalf.
- Select MTD-compatible software from HMRC's list.
- Keep digital records of all income and expenses, categorised correctly.
- Send quarterly updates to HMRC via your software.
- File your tax return and pay by 31 January following the end of the tax year.
Penalties and exemptions
HMRC has introduced a points-based penalty system for late submissions. You get a point for each missed deadline, and once you reach a certain number of points within a period, you'll receive a financial penalty. The threshold is typically four points within two years, but this can vary. Late payment penalties are separate and based on the amount owed and how late it is, with interest accruing. It's important to note that points reset after a period of compliance.
Exemptions are available if you're digitally excluded due to age (over 74), disability, or living in an area with no internet access. You must apply to HMRC for an exemption; it's not automatic. Also, if you have a religious objection to using computers, you may qualify. There are also exemptions based on insolvency or if your business is run entirely by paper with no digital capability. Check HMRC's guidance to see if you meet the criteria. If you're unsure, consult a tax adviser.
- Late submission: points accumulate, leading to financial penalties.
- Late payment: interest and penalties based on the amount and delay.
- Exemptions for age, disability, remote living, or religious objections-apply to HMRC.
- Agents can manage MTD on your behalf, but you must authorise them.
How MTD relates to EU VAT changes
UK MTD is separate from the EU's VAT in the Digital Age (ViDA) package, but if you trade with the EU, you should be aware of both. ViDA was adopted in March 2025 and rolls out in stages. From 1 January 2027, minor clarifications affect the One-Stop Shop (OSS) and Import One-Stop Shop (IOSS) schemes. From 1 July 2028, new 'deemed supplier' rules make platforms for short-term accommodation and road passenger transport responsible for VAT in certain cases. If you sell goods or services to EU consumers, these changes could affect your VAT obligations.
For UK domestic taxes, follow HMRC's MTD rules, not EU rules. However, if you use online platforms like Airbnb or Bolt, the deemed supplier measures might impact your income reporting. Even if the platform handles VAT, you still need to report income for UK tax purposes under MTD. Stay informed about both sets of rules to avoid surprises.
- UK MTD and EU ViDA are separate-don't confuse them.
- OSS and IOSS users should check updates effective 1 January 2027.
- From July 2028, platforms may be 'deemed suppliers' for VAT on short-term lets and passenger transport.
- If you use such platforms, ensure your income is reported correctly for UK tax.
Steps to prepare your business now
First, calculate your qualifying income for the 2026-27 tax year, as this determines whether you'll need to join from April 2027. If you're already above £50,000 and haven't signed up, do so immediately-HMRC began auto-enrolling eligible taxpayers from September 2026. If you're between £30,000 and £50,000, plan to enrol before April 2027. Even if you're below the threshold, consider voluntary registration to get ahead of future changes.
Second, research and choose MTD-compatible software. Many offer free trials, so test a few to find what fits your business. Third, start keeping digital records right away, even if you're not yet required. This will help you identify issues early. Finally, monitor HMRC's communications; they may contact you about MTD. If you have an accountant, ensure they are MTD-ready and authorised to act for you.
- Check your qualifying income for 2026-27 to determine your start date.
- Sign up voluntarily if you're below the threshold but expect to grow.
- Choose software from HMRC's list of MTD-compatible products.
- Set up digital record-keeping now to ease the transition.
What to verify
- The exact thresholds and dates are based on HMRC guidance as of August 2026, but you must verify the latest updates on gov.uk because changes may occur.
- Penalty amounts and exemption criteria are subject to change; check the official HMRC pages or consult a tax adviser.
- EU ViDA changes affect UK businesses only if they trade with the EU; they do not apply to UK domestic tax.
Questions and answers
When exactly do I need to start using Making Tax Digital for Income Tax?
The date depends on your qualifying income from the previous tax year. If your 2024-25 income was over £50,000, you must comply from 6 April 2026. If your 2026-27 income is over £30,000, you must start from 6 April 2027. If your 2027-28 income is over £20,000, you must start from 6 April 2028. Always verify with HMRC's latest guidance, as these thresholds are based on filed returns and may be updated. [2]
What are the penalties for not complying with MTD for Income Tax?
For late quarterly updates, you receive penalty points. Accumulating four points within a two-year period triggers a £200 penalty. For late tax return submission, there are additional penalties, and late payment incurs interest and penalties based on the amount owed. Exemptions apply if you meet HMRC's criteria, but you must apply. [2]
Can I get an exemption from MTD for Income Tax?
Yes, you may qualify for an exemption if you are digitally excluded due to age (over 74), disability, or living in a remote area without internet access. You must apply to HMRC with evidence. Religious objections and insolvency are also grounds. Check HMRC's guidance for the full list of conditions. [2]
Sources and verification date
- Official source: taxation-customs.ec.europa.eutaxation-customs.ec.europa.eu · Checked
- Official source: gov.ukgov.uk · Checked
- Official source: taxation-customs.ec.europa.eutaxation-customs.ec.europa.eu · Checked