Making Tax Digital for Income Tax: what you need to do in 2026

Making Tax Digital for Income Tax (often shortened to MTD for Income Tax, or MTD ITSA) is the biggest change to self-employed tax reporting in a generation. As of 6 April 2026 it is no longer a future plan — it is live for the first wave of taxpayers. If you are a sole trader or landlord in Erith or the wider Bexley and Dartford area, this guide explains exactly what is now expected of you.

What is Making Tax Digital for Income Tax?

MTD for Income Tax replaces the single annual Self Assessment return with a more frequent, digital process. Instead of one tax return after the year ends, you keep digital records of your income and expenses and send HMRC a summary every quarter using compatible software, followed by a final declaration after the tax year.

The aim, in HMRC's words, is to bring tax reporting closer to real time — so the year-end scramble disappears and your tax position is clearer throughout the year.

Who has to use it, and when?

MTD for Income Tax is being phased in by income level. Your qualifying income is your total gross income from self-employment and property — before deducting any expenses.

HMRC estimates around 780,000 people joined in the first wave in April 2026, with a further 970,000 following in 2027. If your income is below £20,000 you are not currently mandated — though that threshold may fall further in time.

What you actually have to do

• Keep digital records of every business transaction — no more shoebox of receipts or a year-end spreadsheet catch-up.
• Use MTD-compatible software that connects directly to HMRC.
• Submit a quarterly update of your income and expenses four times a year.
• Submit a final declaration after the tax year to confirm your figures and claim reliefs — this replaces the old Self Assessment return.

The quarterly deadlines

Standard quarterly periods end on 5 July, 5 October, 5 January and 5 April, with each update due one month and seven days later — so 7 August, 7 November, 7 February and 7 May. You can elect to use calendar-month quarters instead, which often makes bookkeeping tidier.

What about penalties?

HMRC has confirmed a soft landing for the first wave: no late-submission penalty points apply to the first four quarterly updates for those who joined in April 2026. That does not mean you can ignore them — every quarterly update must still be filed before you can submit your final declaration — but it gives genuine breathing room while you adjust to the new rhythm.

How to prepare

• Check your qualifying income for 2024–25 to confirm which wave you are in.
• Choose MTD-compatible software now, rather than at the deadline.
• Move to digital record-keeping — ideally bank-feed bookkeeping so transactions flow in automatically.
• Build the quarterly cadence into your diary, or hand it to an accountant who files on your behalf.

For many sole traders this is the moment it makes sense to bring in an accountant. The quarterly cadence is manageable, but it is four more deadlines a year — and the software, the digital records and the final declaration all need to line up. We handle MTD end-to-end for sole traders across Erith and Kent, from choosing software to filing every quarter.

If you are also weighing up whether to incorporate, our guide on sole trader vs limited company in 2026 is a useful companion read, since your business structure affects how MTD applies to you.