Fox Ledger / Entries / Making Tax Digital
Do I need Making Tax Digital for Income Tax?
Posted by the editors. Figures stated by tax year.
You need Making Tax Digital for Income Tax if you are a sole trader or landlord whose qualifying income passes the threshold: over £50,000 on the 2024 to 2025 return means from 6 April 2026, over £30,000 on the 2025 to 2026 return means from 6 April 2027, and over £20,000 on the 2026 to 2027 return means from 6 April 2028.
The questions below are the ones people tend to ask once they have read that sentence twice. Answers come from HMRC's guidance as published when this page went up, and the guidance is still being revised, so check the dates shown against it.
.jpg){kind=link}
What counts towards the threshold?
Qualifying income is your total income from self-employment and property, measured before expenses. So a business with a £35,000 turnover and £20,000 of costs is judged on the £35,000, not on its £15,000 profit. Wages from a job, dividends, pensions and your share of partnership profits as an individual partner do not count. HMRC's example: £25,000 of rent and £27,000 of self-employment income add up to £52,000.
| Return checked | Qualifying income over | Start date |
|---|---|---|
| 2024 to 2025 | £50,000 | 6 April 2026 |
| 2025 to 2026 | £30,000 | 6 April 2027 |
| 2026 to 2027 | £20,000 | 6 April 2028 |
Will HMRC tell me?
HMRC reviews each return and writes to confirm that you must start from the beginning of the following tax year. A letter is useful, but do not rely on one: the threshold rule applies to you anyway, and the eligibility page has a checking tool you can use. To sign up you must already be registered for Self Assessment and have submitted a return in the last two years.
Are there exemptions?
Yes. Digital exclusion is the example HMRC gives, and it now keeps the list on a separate page linked from the eligibility guidance. Some exemptions apply automatically and others need an application. An exempt person still reports income and gains on a Self Assessment return. Partnerships are expected to join in future, with no timeline yet.
What do I actually have to do differently?
Two things. You keep digital records, and you send a summary every quarter through compatible software, in addition to filing the annual return through that software.
Each digital record needs the amount, the date and a category, using the same categories as Self Assessment. If your turnover is under £90,000, HMRC says a sole trader only needs to record whether a transaction is income or an expense. Retailers may record daily gross takings instead of each sale. You keep original documents or copies, such as bank statements and invoices, just as you do now; our records guide covers how long.
When are the quarterly updates due?
| Update | Covers, from 6 April 2026 to | Send by |
|---|---|---|
| First | 5 July 2026 | 7 August 2026 |
| Second | 5 October 2026 | 7 November 2026 |
| Third | 5 January 2027 | 7 February 2027 |
| Fourth | 5 April 2027 | 7 May 2027 |
According to HMRC's quarterly updates guide, an update contains category totals, not individual receipts. You make no accounting or tax adjustments first. A quiet quarter still needs an update, even at nil. If you spot a mistake, correct the record and the correction flows into the next update. You do not resend earlier ones.
Do I pay tax every quarter?
No, and this is the most persistent misunderstanding. HMRC's November 2026 reminder states that no tax calculation is involved and no payment is due when you send an update. The return page confirms that the scheme does not change how you pay or the dates, so the Self Assessment calendar of 31 January and 31 July still holds. The annual return itself remains due by 31 January following the tax year. Before submitting it, you make your adjustments and check the income HMRC has added, such as PAYE.
Do I have to buy accounting software?
Specialist accounting software is not required, according to HMRC, and some recognised options are free. A spreadsheet is allowed too, but it must be digitally linked to your submission software through something like bridging software, CSV import or an API. Once a record has been sent in an update, you must not move it by hand, so retyping totals from a spreadsheet into another program does not satisfy the rule.
That has a practical consequence for anyone who keeps a paper cash book like the sample in our records guide. The record has to end up in compatible software, so the paper book alone will no longer do. If your income makes you a likely 2027 or 2028 joiner, the year before is a good time to try out a product on real figures, while the penalties do not yet apply to you.
What happens if an update is late?
For 2026 to 2027, no penalty points apply to late quarterly updates, though they must be sent before you submit your return. A late return still earns points. From later tax years, each missed update earns a point, and reaching four points brings a £200 penalty. Volunteers have different terms: no penalties for late updates, and a £200 penalty at two points for late returns. Late payment penalties continue to apply as well.
Does this change how I work out my profit?
The tax rules on what you can claim stay the same. Your expenses are still judged by the same tests, and the choice between cash basis and traditional accounting is still yours where allowed. What changes is the frequency with which the figures have to be up to date, and for a lot of sole traders that will be the bigger adjustment.
An agent or accountant can act for you under the scheme, and it is worth asking how they intend to handle it if you already use one. If you are close to a threshold, have several income sources or own property jointly, get someone qualified to look at your position, because the qualifying income rules have details this general guide leaves out.
General education, not personal advice. Links in this article go to the GOV.UK pages we read while writing it, opened again on 8 November 2026. Rates and rules change, so check the current figure on GOV.UK before relying on it.