Making Tax Digital for Income Tax: a plain-English overview

One of the biggest changes to UK self-employment and landlord tax reporting in a generation is now in force. Here is what it means, who it affects, and the choices you have — without the jargon.

What has changed

Since 6 April 2026, Making Tax Digital (MTD) for Income Tax is mandatory for UK sole traders and landlords with combined gross income from self-employment and property over £50,000. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028 — so many more people are drawn in each year.

Under MTD you must:

• keep digital records of your business or property income and expenses;
• send HMRC a quarterly update through recognised software; and
• complete a year-end final declaration, which replaces the Self Assessment return.

Quarterly updates are cumulative — each one covers the tax year so far, so a mistake in an earlier quarter is automatically corrected in the next update. Updates contain totals per HMRC category, not individual transactions, and they do not mean paying tax quarterly: tax is still paid by 31 January as before.

The deadlines

For 2026/27 — the first year of MTD for Income Tax — HMRC has confirmed a soft landing: no penalty points are issued for late quarterly updates. From 2027/28 the points system applies in full (one point per late quarterly update, a £200 fine at four points, points expiring after 24 months). The easement covers quarterly updates only — late payment and the year-end final declaration still attract penalties and interest, so the deadlines still matter.

Do you need accounting software?

Not necessarily. Spreadsheets are allowed as digital records, provided they connect to HMRC through recognised bridging software using digital links — meaning your category totals must flow to HMRC by formula or software link, not retyping. Bridging tools (such as those on HMRC's recognised-software list) typically cost far less than a full accounting software subscription, and for straightforward affairs a well-structured spreadsheet plus a bridging tool is a perfectly compliant route.

How we can help

Alongside our consultancy work, Cunniffe & Helm publishes digital products for small businesses — including MTD Quarterly Kit, our range of ready-made, bridging-software-ready spreadsheet workbooks for landlords and sole traders. Each kit uses HMRC's exact quarterly-update categories, builds the cumulative quarterly figures automatically, and comes with a plain-English "Submit in 20 Minutes" guide and a deadline calendar. One-off payment, VAT included, free updates for 2026/27.