Change is coming to how millions of self-employed people and landlords in the UK report their income to HMRC. Making Tax Digital for Income Tax (MTD IT), formerly known as MTD for ITSA, replaces the familiar annual Self Assessment tax return with digital record-keeping and quarterly updates. If you’re a sole trader or landlord, this is the biggest shift to personal tax reporting and the first wave of taxpayers must comply from 6 April 2026.

At Hilary Sean Services, we’re helping clients get ahead of this change now, rather than scrambling in the new year. Here’s what you need to know.

What is Making Tax Digital for Income Tax?

MTD Income tax requires you to keep digital records of your self-employment and property income and expenses, and to send HMRC a summary every quarter using compatible software rather than filing one tax return a year. At the end of the tax year, you’ll submit a Final Declaration that pulls together all your income sources (including PAYE, dividends, and pensions) to confirm your final tax liability. This replaces the traditional Self Assessment return for anyone within scope.

Who does it affect, and when?

MTD Income tax is being phased in based on your gross income that is your turnover before expenses from self-employment and property combined:

• From 6 April 2026: if your gross qualifying income exceeded £50,000 in the 2024/25 tax year
• From 6 April 2027: if your gross qualifying income exceeded £30,000 in the 2025/26 tax year
• From 6 April 2028: if your gross qualifying income exceeded £20,000 in the 2026/27 tax year

Qualifying income means the combined gross turnover from all self-employment sources plus gross rental income from UK and overseas property. Employment income, dividends, pension income and savings interest do not count towards the threshold.

If you have both self-employment and rental income, they’re added together. For example, someone earning £29,000 from a trade and £22,000 from a rental property has £51,000 of combined gross income which is comfortably over the £50,000 threshold for April 2026.

Partnerships are not yet in scope; a start date for them has not been confirmed.

What will you actually need to do?

If you’re mandated into MTD IT, there are three core requirements:

1. Keep digital records – paper records and basic spreadsheets on their own are no longer sufficient once MTD software is required.
2. Send quarterly updates to HMRC -a summary of income and expenses for each three-month period, using MTD-compatible software. Using standard tax year quarters, the deadlines fall on 7 August, 7 November, 7 February and 7 May.
3. Submit a Final Declaration -after the tax year ends, confirming your total income and tax position. The deadline remains 31 January, as it is now.

You’ll need commercial software to do this, either a full accounting package or bridging software that links existing spreadsheets to HMRC’s systems.

Penalties and exemptions

HMRC has confirmed a “soft landing” for the first cohort: taxpayers joining in April 2026 will not receive penalty points for late submission of their first four quarterly updates. Beyond that, MTD IT operates under a separate points-based penalty regime from Self Assessment, similar to the system already used for VAT.

Some taxpayers will be automatically exempt or eligible for a temporary deferral for example, those with trust or estate income, non-residence considerations, or farmers and creative artists claiming averaging relief. If your income later drops, you can also come out of MTD IT once your reported income falls to £20,000 or less for three consecutive years. If digital record-keeping simply isn’t practical for you, you can now apply directly to HMRC for an exemption.

What should you be doing now?

With April 2026 fast approaching for the first phase, we’d recommend:

• Check your 2024/25 gross income now to see which phase applies to you.
• Start looking at software early – HMRC has relaxed the sign-up process so you no longer need to have chosen your software before registering.
• Consider voluntary sign-up if you’re below the threshold, so you’re comfortable with quarterly reporting before it becomes mandatory.
• Talk to your accountant about how your bookkeeping processes will need to change, particularly if you currently rely on spreadsheets or paper records.

How Hilary Sean Services can help

Making Tax Digital is as much an operational change as a compliance one as it changes how often you need to look at your numbers, not just how you file them. At Hilary Sean Services, we support UK SMEs and sole traders with exactly this kind of transition: setting up digital record-keeping, choosing the right software, and building a quarterly reporting rhythm that fits around your business rather than disrupting it.

If you’re not sure which MTD phase applies to you, or want a hand getting set up before the rules bite, get in touch, we’re happy to talk it through.

This article is general guidance and doesn’t constitute tax advice. Your specific circumstances may affect how and when MTD applies to you, please speak to us or check the latest guidance on GOV.UK before making decisions.