Making Tax Digital for Income Tax: What You Need to Know for April 2026

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) has officially launched from 6 April 2026, marking the biggest change to the Self-Assessment system since 1997. If you are self-employed or a landlord, this could directly affect how you record your income and report to HMRC. Here is everything you need to know.

What Is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) is HMRC's programme to modernise the UK tax system by requiring digital record-keeping and more frequent reporting. MTD for VAT has applied to all VAT-registered businesses since April 2022. MTD for Income Tax is now rolling out in phases from April 2026, starting with the highest earners.

Who Is Affected and When?

MTD for Income Tax is being introduced in three phases based on gross qualifying income (self-employment and/or property rental income before expenses):

• Phase 1 — From 6 April 2026: Sole traders and landlords with qualifying income above £50,000.

• Phase 2 — From April 2027: Those with qualifying income above £30,000.

• Phase 3 — From April 2028: Those with qualifying income above £20,000.

Qualifying income includes gross self-employment income and gross property rental income combined. It does not include PAYE wages, investment income, dividends, or pensions. Partnerships and limited companies are not currently affected.

What Are the Three Core Requirements?

• Digital record-keeping: You must keep records of all business income and expenses digitally using MTD-compatible software. Paper records are no longer sufficient.

• Quarterly updates: You must submit year-to-date income and expense summaries to HMRC four times per year. These are not full tax returns — they provide HMRC with more frequent visibility of your finances.

• Final Declaration: After the tax year ends on 5 April, you must submit an End of Period Statement and a Final Declaration by 31 January, replacing the current Self-Assessment return.

  
  

Quarterly Reporting Deadlines (2026/27 Tax Year)

Quarterly updates follow the tax year (6 April to 5 April) regardless of your own accounting year-end. The four quarterly deadlines for the 2026/27 tax year are:

• Quarter 1: 6 April – 5 July 2026 → deadline 5 August 2026

• Quarter 2: 6 July – 5 October 2026 → deadline 5 November 2026

• Quarter 3: 6 October – 5 January 2027 → deadline 5 February 2027

• Quarter 4: 6 January – 5 April 2027 → deadline 5 May 2027

• Final Declaration: deadline 31 January 2028

  
  

Penalties for Non-Compliance

HMRC is introducing a new points-based penalty system for MTD. Each missed quarterly update or Final Declaration deadline earns one penalty point. Once four penalty points have accumulated, a £200 financial penalty is issued. Further penalties apply for continued non-compliance.

What Steps Do You Need to Take?

• Check whether your qualifying income exceeds £50,000 — if so, you are in scope from April 2026.

• Sign up for MTD for Income Tax via HMRC's online service before the start of the tax year you become eligible.

• Choose and set up MTD-compatible software (such as QuickBooks, Xero, FreeAgent, or similar), our preference is Xero.

• Begin keeping all income and expense records digitally from the start of your first MTD period.

• Speak to your payroll or tax adviser about how MTD interacts with any PAYE income or other income sources.

  
  

Exemptions

HMRC may grant exemptions in certain circumstances, such as where a taxpayer is digitally excluded due to age, disability, religious grounds, or lack of internet access. If you believe you may qualify for an exemption, you should contact HMRC directly.

How Crown Payroll Services Can Help

MTD represents a significant change in how income is reported to HMRC, and the transition can feel daunting. At Crown Payroll Services, we can help you understand whether you are in scope, guide you through the sign-up process, recommend suitable software, and ensure your quarterly submissions are accurate and on time.

Get in touch with us today on 01942 644864 or email hello@crownpayrollservices.co.uk — we're here to make the transition as smooth as possible.