Making Tax Digital for Income Tax in 2026/27: what changes for sole traders and landlords

Making Tax Digital for Income Tax (MTD for Income Tax, sometimes called MTD ITSA) is a change in how sole traders and landlords report income to HMRC. From 6 April 2026, the first group of taxpayers must keep digital records and send quarterly updates to HMRC through compatible software, in addition to a yearly final declaration. The underlying tax rules and the amount of tax due do not change; the way information reaches HMRC does.

Who is in scope for 2026/27

MTD for Income Tax is being phased in by income level. HMRC looks at qualifying income — gross income from self-employment and UK or overseas property, before expenses — reported on the Self Assessment return for the tax year two years before the start date.

Partnerships are not in scope for 2026/27; HMRC has said the timetable for partnerships will be announced separately. Some people are exempt or can defer, including those who cannot use digital tools because of age, disability, location or religious belief. A list of exemptions and how to apply is on GOV.UK.

To join, the person must be registered for Self Assessment and have filed a tax return in the previous two years. Sign-up is through an agent or directly in HMRC online services.

Quarterly updates: dates and content

Each quarter you send HMRC a summary of income and expenses from your digital records. The standard quarterly periods follow the tax year, and the submission deadline is the 7th of the month after each quarter ends.

There is an option to use calendar-quarter periods (1 April to 30 June, and so on) instead of the standard dates. The deadlines stay on the 7th of the following month.

HMRC has confirmed that penalty points for late quarterly updates will not apply in the first year (2026/27). Interest and late-payment penalties on tax that is actually due still apply as before.

Digital records and compatible software

Under MTD for Income Tax, each sole-trade and each property business keeps its own set of digital records. For each transaction you need to capture the amount, the date, and the income or expense category. Records can be kept in HMRC-recognised software, in a spreadsheet linked to bridging software, or across both.

HMRC maintains a list of compatible software on GOV.UK. A single tool must be able to keep digital records, send quarterly updates and submit the final declaration — or several tools must be joined by digital links.

The final declaration replaces the Self Assessment return

At the end of the tax year, the final declaration brings together all income — self-employment, property, employment, savings, dividends, and so on — plus any adjustments and claims (for example, capital allowances or private-use adjustments). It is submitted through MTD-compatible software.

For the 2026/27 tax year, the final declaration deadline is 31 January 2028. The Self Assessment payment dates stay the same: a balancing payment by 31 January and, where applicable, payments on account on 31 January and 31 July.

You still need to file a Self Assessment return for the tax year before you start using MTD for Income Tax (so, the 2025/26 return by 31 January 2027 if you are joining on 6 April 2026).

What tends to need attention first

• Bookkeeping cadence. Updates are quarterly, so bookkeeping that happens once a year will not work. Many people move to monthly or fortnightly reconciliations.
• One set of records per business. A sole trader with a trade and a rental property has two sets of digital records and two sets of quarterly updates.
• Software choice. The chosen tool needs to cover both quarterly updates and the final declaration, or be linked to one that does.

Nella is an AI finance assistant built by the accountants at AccTek Ltd. It connects to Xero, QuickBooks, Sage or FreeAgent and answers plain-English questions about your numbers, including a running VAT, PAYE and Companies House date timeline. For a view of how MTD for Income Tax maps onto a specific business, a qualified accountant is the right first stop; the page on MTD for Income Tax explains what Nella does and does not do here.

Sources

• GOV.UK u2014 Check if you're eligible for Making Tax Digital for Income Tax
• GOV.UK u2014 Using Making Tax Digital for Income Tax
• GOV.UK u2014 Making Tax Digital for Income Tax dates

Nella provides financial information and education, not accounting or tax advice. Nella shows you the numbers. When a question needs professional judgement, such as a filing or a tax decision, Nella says so and points you to a qualified accountant.