Making Tax Digital for Income Tax is no longer something that happens "in 2026". It is live, and the first quarterly submission is due on 7 August 2026. For sole traders and landlords with qualifying income above £50,000, this is the biggest change in tax reporting in a generation.
The mechanics, once you get past the jargon, are not complicated. The timeline is tight though, and there are traps that catch people who wing it. This guide walks through what to do in the next few weeks.
In a nutshell
- Check if you are in scope for the 2026 to 27 tax year. Sole traders and landlords whose gross self employment and property income on the 2024 to 25 Self Assessment return was above £50,000.
- Pick MTD compatible software. HMRC keeps an approved list. Free options exist for simple cases, paid options if you want bookkeeping plus invoicing.
- Set up digital records before 5 July 2026. Every transaction from 6 April 2026 onwards must sit in the software as a digital record.
- Submit your first quarterly update by 7 August 2026. Cumulative totals of income and expenses for 6 April to 5 July 2026.
- The three remaining 2026 to 27 deadlines are fixed. 7 November 2026, 7 February 2027 and 7 May 2027.
- The Final Declaration replaces your Self Assessment return. Due 31 January 2028 for the 2026 to 27 tax year.
- Penalties: there is a first year soft landing. No penalty points for late quarterly updates in 2026 to 27, but the Final Declaration is still under normal late filing penalty rules.
What Making Tax Digital for Income Tax actually is
MTD for Income Tax replaces the once a year Self Assessment return with a digital, quarterly reporting cycle. Instead of one tax return in January, you send HMRC five submissions: four quarterly updates and one Final Declaration at year end.
Records must sit in HMRC approved software. Paper ledgers and a shoebox of receipts no longer cut it. The software submits directly to HMRC's API on your behalf.
This applies separately to each source of income. A sole trader with a buy to let flat submits two streams of quarterly data, not one combined figure.
1. Check if you are in scope for the 2026 to 27 tax year
You are in scope from 6 April 2026 if your qualifying income in 2024 to 25 was above £50,000. Qualifying income is gross turnover from self employment plus gross rental income from property, before any expenses or reliefs.
Two points to flag:
- It is based on gross income, not taxable profit. A landlord with £55,000 of rent and £20,000 of mortgage interest is in scope.
- HMRC writes to taxpayers it believes are in scope, but the legal duty to check is yours. The deadlines apply whether you get a letter or not.
The threshold drops to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. If you are climbing toward £50,000, treat 2026 to 27 as a free dress rehearsal.
2. Pick MTD compatible software, free or paid
HMRC publishes an approved list of MTD for Income Tax compatible software. You cannot submit through your existing HMRC online account or a spreadsheet alone. The software has to be on the list.
Free options like My Tax Digital, QuickFile and Self Assessment Direct cover the basic quarterly update flow. Fine if your bookkeeping is straightforward.
Paid options like Xero, QuickBooks, Sage and FreeAgent start around £7 to £20 per month and bundle bank feeds, invoicing, receipt capture and VAT submissions. If you already use one for VAT, the MTD ITSA module is usually a small add on.
Choose the simplest tool that fits your business. A landlord with two properties does not need a £30 a month platform. A sole trader plumber with 200 transactions a month probably does.
3. Set up digital record keeping before 5 July 2026
Every transaction dated 6 April 2026 onwards has to be entered as a digital record in your chosen software. That means:
- Income recorded by date, amount and category
- Expenses recorded by date, amount and category, with the receipt linked or filed
- Bank feeds connected so the software pulls in transactions automatically (strongly recommended)
The first quarter ends 5 July 2026. By then every penny in and out of the business needs to be in the software. If you are on notebooks or spreadsheets, block out a weekend in June to migrate.
4. Submit your first quarterly update by 7 August 2026
Q1 covers 6 April to 5 July 2026 and is due 7 August 2026. Once your records are in place the mechanics are simple:
- Open the software's MTD module.
- Generate the quarterly summary (totals of income and expenses by category).
- Review for missing transactions, miscategorised expenses or duplicates.
- Click submit. The software sends the figures directly to HMRC.
You submit cumulative totals, not a tax calculation. There is no tax bill at the quarterly stage. Adjustments, reliefs and allowances all wait for the year end. Treat each update as a data snapshot, not a mini tax return.
5. The three remaining 2026 to 27 deadlines are fixed
After the first submission, the cycle continues every three months:
- Q2: 6 July to 5 October 2026, due 7 November 2026
- Q3: 6 October 2026 to 5 January 2027, due 7 February 2027
- Q4: 6 January to 5 April 2027, due 7 May 2027
You can submit earlier if your records for the period are complete. You cannot submit later without entering the penalty regime once the soft landing ends.
6. The Final Declaration replaces your Self Assessment return
At the end of the tax year you submit a Final Declaration, which is the modern replacement for the Self Assessment return. It is due by 31 January 2028 for the 2026 to 27 tax year, the same date Self Assessment used to fall on.
The Final Declaration is where the tax is actually calculated. It pulls together the four quarterly updates, applies adjustments, capital allowances, reliefs, pension contributions and Gift Aid, and lets you declare other income (employment, dividends, savings) before you pay the balance.
Crucially, the Final Declaration is still subject to normal late filing penalties. The soft landing covers quarterly updates only.
7. Penalties and the first year soft landing
HMRC has confirmed a soft landing for 2026 to 27. No penalty points are issued for late quarterly updates that first year. Useful breathing room while you learn the software.
From 6 April 2027 the points regime kicks in:
- One point per late quarterly update.
- At four points HMRC charges a £200 penalty.
- Every further late submission while at the threshold triggers another £200.
- Points fall away after 24 months of compliance.
Late payment of tax at the Final Declaration carries the usual interest and percentage penalties on top.
A quick worked example: Sarah, a sole trader plumber
Sarah's 2024 to 25 Self Assessment showed £62,000 of turnover and £18,000 of expenses. Her qualifying income is over £50,000, so she is in scope from 6 April 2026.
In May 2026 she signs up for FreeAgent at £19 a month, connects her bank account and card machine, and uploads receipts via the mobile app. By end of July her software shows £15,800 of income and £4,400 of expenses for Q1.
On 30 July 2026 she opens FreeAgent, clicks "Submit MTD update", recodes £1,200 of materials sitting in "Other", and submits. HMRC returns a confirmation reference in 30 seconds. Total time: 25 minutes.
Things to watch out for
- Two streams, two submissions. Self employment and property income are reported separately.
- Tax year aligned, not your year end. A 30 June accounting year end is irrelevant to MTD quarterly periods.
- Joint property owners. Each owner reports their share and is independently assessed against the £50,000 threshold.
- The threshold is sticky. Once HMRC notifies you, you stay in MTD even if income drops below the threshold later, unless you formally claim exemption.
- Soft landing is for points, not behaviour. HMRC can still ask questions and open enquiries in 2026 to 27. Sloppy data now creates problems later.
How Ollen Services Can Help
We are already running MTD for Income Tax submissions for clients. If you are not sure whether you are in scope, which software to choose, or how to migrate from paper or spreadsheets, we can take the setup off your plate and run the quarterly cycle for you. We can also review your Q1 figures before you submit, so you do not start the new regime with a categorisation error baked in.
Get in touch on 07513 491 259 or hello@ollenservices.co.uk to talk through your situation. The 7 August 2026 deadline is closer than it looks.