Updated August 2026
This guide first went up before MTD went live. Two things have changed since: the first quarterly deadline, 7 August 2026, has passed, and HMRC has confirmed there are no penalties for missed quarterly updates in the 2026/27 tax year. The original version described the points system without that grace period. Corrected below.
MTD for Income Tax is the biggest change to self-employed tax since Self Assessment arrived in 1996. Since 6 April 2026 it applies to sole traders and landlords whose combined income is over £50,000.
What changed
Instead of one tax return a year, you send HMRC four quarterly updates through approved software, then a final declaration at year end. The updates are running totals of income and expenses. They aren't tax bills, and your payment dates haven't moved.
Who it affects, and when
- From April 2026: combined self-employment and property income over £50,000
- From April 2027: the threshold drops to £30,000
- From April 2028: it drops again to £20,000
Careful with the word income. It means turnover before expenses, not profit. £55,000 of takings with £20,000 of costs is still in scope.
What you need
- MTD-compatible software connected to HMRC
- Digital records, ideally straight from your bank feed
- Or an accountant who does all of it for you, which is rather our point
What doesn't change
- How your tax is calculated
- When you pay: 31 January and 31 July, same as always
- What you can claim as expenses
Penalties, corrected
For 2026/27 there are no penalties for late quarterly updates. In HMRC's own words: "There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year." From 2027/28 each missed update earns a point, and the fourth point brings a £200 penalty. Late payment penalties and interest are separate and do still apply.
Source: HMRC, Penalties for Making Tax Digital for Income Tax. Correct as at August 2026.