Making Tax Digital for Income Tax: the plain-English guide

Let me start with the thing that trips up nearly everyone, because if you get this one wrong the rest doesn’t matter. Making Tax Digital runs on your grossincome. Not your profit. The rent that lands in your account before the mortgage, the letting agent, the boiler repair, all of it comes off. HMRC looks at the top-line number. So a landlord pulling £55,000 in rent who’s barely breaking even after costs is still very much in scope, and I’ve watched people argue this on forums for pages before the penny drops.

Right. From the top.

What MTD for Income Tax even is

For decades, if you had rental or self-employment income, you did one Self Assessment return a year. Gather everything up, file it by 31 January, done. Making Tax Digital for Income Tax replaces that one annual return with four quarterly updates plus a final declaration at the end. Five submissions instead of one. And you have to do it through software that talks to HMRC directly; you can’t type the numbers into the HMRC website anymore.

It went live on 6 April 2026. That’s not a future thing you can put off, it’s happening now for the first wave.

Are you actually in?

Three questions decide it. First, is your combined gross income from property and self-employment over the threshold? That threshold is £50,000 right now. It drops to £30,000 in April 2027, and again to £20,000 in April 2028. So even if you’re comfortably under today, there’s a decent chance you’re in the queue.

Second, and this catches people out: which of your income counts? Rent from UK property, yes. Self-employment turnover, yes, and the two get added together. But dividends, your salary, pension income, savings interest, capital gains, none of those count towards the threshold. Neither does income from property you hold inside a limited company; that’s corporation tax, a completely separate world.

Whether you were mandated from April 2026 was worked out from the return you filed by 31 January 2026, the one covering the 2024/25 tax year. HMRC has been writing to people they think are caught, but here’s the part worth underlining: the legal duty to check is yours. The letter is a courtesy, not the trigger. If you qualify and no letter turns up, you’re still in.

Third, are you an individual rather than a company? MTD for Income Tax is for unincorporated landlords and sole traders. Limited companies file a CT600 and sit outside it entirely, at least until a separate MTD for Corporation Tax regime arrives, which has no firm date. There are a handful of other exemptions too, trusts and estates, people who genuinely can’t use digital tools, and a few narrower cases, but for most landlords it comes down to those three questions.

What the quarterly updates actually involve

This is the bit people dread and it’s honestly less brutal than it sounds. A quarterly update is a summary: totals of your income and expenses by category for the period. It is not a mini tax return. Nothing gets calculated, no tax falls due, you’re just sending HMRC a running picture.

And they’re cumulative, which is the feature nobody explains properly. Each update restates the whole year so far, not just the latest three months. So your second update covers April through September, not July through September. Sounds like extra work, but it’s actually the safety net: if you made a mess of quarter one, you just fix it in quarter two. The error doesn’t follow you around all year. Estimated figures are fine at this stage too, as long as you tidy them up later. A repair invoice hasn’t landed yet? Estimate it now, correct it next quarter. Missing the deadline while you wait for perfect numbers is the worse move.

Here are the dates for a standard tax-year quarter setup.

Then, after the four updates, comes the final declaration by 31 January 2028. That’s the one that replaces your old Self Assessment return, where you confirm the full year, claim your allowances, add any income that wasn’t in the quarterly updates, and settle up. The payment deadlines haven’t moved, by the way. 31 January and 31 July, same as always.

The penalties, and the year-one let-off

Late submissions run on points. Miss a quarterly update, get a point; rack up four points and you’re hit with a £200 penalty. But 2026/27 has a soft landing: HMRC won’t issue points for late quarterly updates in that first year.

Don’t read too much into that though, because it has two holes people fall straight through. The soft landing doesn’t cover the final declaration, which carries normal late-filing penalties from day one. And it doesn’t touch late-payment penalties or interest, which apply the moment your tax is paid late. So the updates get a grace period. Paying your bill and filing your year-end don’t.

Software, briefly

HMRC doesn’t provide its own software and never intends to. You either pick a commercial product from its recognised list, or you use bridging software, which sits on top of a spreadsheet you already keep and just handles the submission to HMRC. That second route matters more than the big accounting brands would like you to know: if you’re happy in Excel, you don’t have to move your whole life into an app. A spreadsheet plus bridging software is fully compliant.

Which route fits depends entirely on your situation, how many properties, whether you also trade, whether anything’s owned jointly. That’s the whole reason we built the selector instead of just throwing a table at you.

The situations where it gets complicated

The above is the general shape. But plenty of people don’t fit the general shape, and that’s where the standard advice quietly stops being right. We’ve written the awkward cases up properly:

If you used to run a holiday let, the FHL regime ending in 2025 changed what your software needs to handle; here’s the holiday-let guide. If some of your properties sit in a limited company and some in your own name, only one side counts, and the mixed-portfolio guide walks through where the line falls. Living abroad with a UK rental brings its own rules and one deferral most people miss, covered in the non-resident guide. And if you’re relying on rent and a bit of freelance work each staying under the threshold, read this on combining the two first, because they get added together and that surprises people.