HMRC MTD Income Tax Changes 2026: Every Rule, Date and Penalty Explained

HMRC’s Making Tax Digital for Income Tax Self Assessment (MTD ITSA) changes the way self-employed people, landlords and partnerships report tax in the UK from 6 April 2026. If your qualifying income from self-employment or property is over £50,000 in 2024 to 2025, you’ll need MTD-compatible software, digital records, and four quarterly updates to HMRC every tax year, plus a Final Declaration to replace the old Self Assessment tax return. The £30,000 threshold follows on 6 April 2027, and £20,000 from 6 April 2028. This page is the definitive UK guide to every HMRC MTD income tax change announced so far, the dates that actually apply to you, and the penalty points system that replaces the old £100 late-filing fine.

What is HMRC’s Making Tax Digital for Income Tax (MTD ITSA)?

Making Tax Digital for Income Tax (often shortened to MTD ITSA, or just “MTD for Income Tax”) is HMRC’s reform of the Self Assessment tax return for sole traders and landlords. It replaces a single annual paper-style return with quarterly digital reporting through HMRC-recognised software. The legal basis is the Income Tax (Digital Requirements) Regulations 2021 (SI 2021/1076), as amended by the Income Tax (Digital Requirements) (Amendment) Regulations 2024.

The change is the second leg of the wider Making Tax Digital programme. MTD for VAT has been live since April 2019 for VAT-registered businesses above the threshold and since April 2022 for everyone else. MTD for Income Tax extends the same digital-record and quarterly-update model to Self Assessment.

Making Tax Digital for Income Tax changes coming in April 2026

From 6 April 2026, three things change at once for affected taxpayers:

• Digital records. Every item of income and expenses linked to a sole-trade business or UK property must be captured digitally, in real time or shortly after, using compatible software. Paper cashbooks no longer satisfy HMRC’s record-keeping requirement.
• Quarterly updates. You’ll send four quarterly summaries to HMRC, each by the 7th of the month following the quarter end (7 August, 7 November, 7 February, 7 May for a standard tax year). Each update is a totals-only submission, not a full return.
• Final Declaration. You replace the old Self Assessment tax return with a Final Declaration by 31 January after the tax year ends. The Final Declaration confirms business profits, property income, and any other income (employment, dividends, interest) for the full year.

HMRC has scrapped the previously-mooted End of Period Statement (EOPS) for each business. From the April 2024 amendment regulations onwards, there’s only the four quarterly updates plus the single Final Declaration.

What tax changes are coming in April 2026?

For income tax purposes, the only change on 6 April 2026 is how you report – not how much you pay. Income tax rates, the personal allowance and the dividend allowance are set in the Finance Act each year and are not part of MTD. What changes is the filing process: digital software, four quarterly updates, and a Final Declaration instead of one annual SA100 return.

Who has to use MTD for Income Tax in 2026?

Three tests have to be met before HMRC can mandate you into MTD ITSA from April 2026:

1. You file a Self Assessment tax return.
2. You have qualifying income from self-employment, UK property, or both.
3. That qualifying income is over £50,000 in the 2024 to 2025 tax year (the year that ends 5 April 2025).

HMRC uses the 2024 to 2025 figures because they’re already filed by 31 January 2026, two months before MTD starts. If you don’t meet all three tests on 6 April 2026, you stay on the old Self Assessment system for the time being.

What is qualifying income for Making Tax Digital?

Qualifying income is the gross turnover from your sole-trade business plus the gross rental income from UK property, before expenses, before the £1,000 trading allowance and before the £1,000 property allowance. It does not include employment income, dividends, savings interest, pension income, capital gains or income from partnerships. If you trade as a sole trader and let a buy-to-let, you add the two gross figures together.

Worked example: a graphic designer turning over £35,000 from freelance work, with a £20,000 rental on one buy-to-let, has qualifying income of £55,000. They’re in MTD ITSA from April 2026.

Making Tax Digital for Income Tax phases and thresholds

HMRC has staged the rollout against three income thresholds. The dates are fixed in regulations, but the threshold check is always against your most recent fully-filed Self Assessment tax return.

• Phase 1 – 6 April 2026. Sole traders and landlords with qualifying income over £50,000 in 2024 to 2025.
• Phase 2 – 6 April 2027. Sole traders and landlords with qualifying income over £30,000 in 2025 to 2026.
• Phase 3 – 6 April 2028. Sole traders and landlords with qualifying income over £20,000 in 2026 to 2027.

HMRC has not yet legislated for partnerships, limited companies or income below £20,000. The Spring Statement 2025 confirmed an aspiration to cover partnerships in a future phase, but no date has been set.

Who is exempt from Making Tax Digital for Income Tax?

No. Three groups stay outside MTD ITSA in 2026:

• Sole traders and landlords with qualifying income at or below £50,000 in 2024 to 2025 (until £30,000 phase 2 catches them on 6 April 2027, then £20,000 in 2028).
• People with a digital exclusion (for example, no reliable internet, religious objection to electronic communications, or a disability that prevents digital record-keeping). HMRC takes a written application and reviews each case.
• People without a National Insurance number (for example, recently arrived migrants without a NINO yet).

Are pensioners exempt from MTD?

Pension income on its own is outside MTD for Income Tax. State pension and private pensions are taxed under PAYE or under the existing Self Assessment rules and aren’t quarterly-update events. A pensioner only enters MTD ITSA if they also have sole-trade or rental income above the relevant threshold. A retired landlord with £52,000 of rental income would still be in scope from April 2026 – the income source, not the age, is what counts.

HMRC MTD penalty points system from April 2026

HMRC has scrapped the £100 fixed late-filing penalty for MTD ITSA. From 6 April 2026, late quarterly updates and late Final Declarations attract penalty points under the points-based regime introduced for VAT in January 2023.

How the points system works:

• Each missed deadline costs one point.
• You hit the points threshold (4 points for quarterly filers) before any cash penalty applies.
• At the threshold, HMRC issues a £200 penalty.
• Each further late submission costs another £200 until you reset by filing on time for the relevant compliance period.

Late payment of tax sits under a separate regime: 0% in the first 15 days, then 3% from day 16, then a further 3% from day 31, plus daily 10% per-annum interest from day 31. Interest is calculated daily on the unpaid balance.

Digital record keeping under MTD for Income Tax

Digital record keeping is the heart of the new system. Every transaction tied to your sole-trade business or UK property must be captured in MTD-compatible software within a reasonable time of being incurred. HMRC accepts that “reasonable” means by the end of the relevant quarter, but the records themselves have to be in digital form, with a digital link between the source data and the quarterly update submitted to HMRC.

What counts as a digital link: a direct API connection between your software and HMRC, an import from your bank feed, an Excel link between two cells in the same spreadsheet, or bridging software that pulls totals from a spreadsheet. What doesn’t count: copy-and-paste, manual re-typing, or printing a report and re-keying it into another system.

How year-end tax return becomes Final Declaration

The familiar SA100 year-end tax return is gone for MTD-mandated taxpayers. In its place is the Final Declaration, submitted through MTD software by 31 January after the tax year. You’ll submit your tax return data once, in the Final Declaration, and that’s the official record HMRC works from.

The Final Declaration covers the same ground as the old SA100: business profits adjusted for tax, property income, employment income (PAYE figures pulled from HMRC), savings interest, dividends, capital gains, and any reliefs or allowances. It just lives inside MTD-compatible software rather than the legacy Self Assessment portal.

What software do you need for MTD for Income Tax?

HMRC publishes a list of recognised MTD software on gov.uk. To file under MTD ITSA you need either a full bookkeeping package that can submit quarterly updates (Xero, QuickBooks, Sage, FreeAgent and a few others have HMRC recognition), or a bridging tool that talks to a spreadsheet you keep separately.

Three things to check before you commit to a tool:

1. HMRC recognition for ITSA, not just VAT. A package that’s MTD-VAT compatible isn’t automatically MTD-ITSA compatible. The HMRC list separates the two.
2. Quarterly update support. Some bridging tools only handle the Final Declaration, not the four quarterly updates. Read the spec carefully.
3. Property income module. Several mainstream packages bolt on UK property as a separate module – confirm it’s included before subscribing.

If you’d rather see a side-by-side, our MTD Income Tax software comparison covers the main options. For free options, see free MTD software for sole traders.

How quarterly updates to HMRC actually work

A quarterly update is not a mini tax return. It’s a totals-only submission of business income and expenses, broken down by category (cost of sales, premises, motor, repairs, and so on). HMRC produces a running estimate of your tax liability after each update, but no tax is due until the Final Declaration is submitted on 31 January.

The standard quarter ends are 5 July, 5 October, 5 January and 5 April. You can elect to align quarters with calendar months (30 June, 30 September, 31 December and 31 March) – this is the calendar-quarter election that HMRC accepts on a per-business basis and which most software packages default to.

You can amend a quarterly update at any point up to the Final Declaration. There’s no penalty for in-year amendments, only for missing the deadline.

What if I have multiple income sources?

You file one quarterly update per business. A sole trader running both a freelance copywriting business and a separate consultancy files two sets of four quarterly updates per tax year. Property income is treated as one business across all UK lettings (furnished holiday lets are still a separate business until those rules are abolished from April 2025). One Final Declaration ties everything together.

HMRC MTD income tax changes for landlords

Landlords with UK property income above the qualifying-income threshold are inside MTD ITSA on the same dates as sole traders. There are three landlord-specific points to flag:

• Joint property. Each owner reports their share. A couple holding a buy-to-let 50/50 each report £15,000 if the gross rent is £30,000.
• Furnished holiday lets. The Finance Bill 2024 abolishes the FHL regime from 6 April 2025. From April 2026, FHL income is rolled into the standard property business for MTD purposes.
• Non-resident landlords. Non-resident landlords with UK property income above £50,000 are in scope on the same date. The Non-Resident Landlord Scheme (NRLS) continues alongside MTD – one is about withholding tax at source, the other about reporting.

HMRC MTD income tax changes for partnerships

General partnerships have been deferred. The original April 2025 plan was scrapped in December 2022, and HMRC has not announced a fresh start date. For now, partnerships file under the existing SA800 partnership return, with each partner showing their share on their own SA100. MTD ITSA mandation for partnerships will be set in a future statutory instrument.

What’s not changing under MTD for Income Tax

Quite a lot. The points worth flagging because they create confusion:

• Tax payment dates. Income tax is still due 31 January after the tax year, with payments on account on 31 January and 31 July if your bill is over £1,000.
• Tax rates and personal allowance. Set by the Finance Act, unchanged by MTD.
• Class 2 and Class 4 National Insurance. Class 2 NI was effectively scrapped from 6 April 2024. Class 4 continues, calculated on profits and reported through MTD just as it was through Self Assessment.
• Trading and property allowances. The £1,000 trading allowance and £1,000 property allowance still apply. They’re claimed at Final Declaration, not in quarterly updates.
• Cash basis vs accruals. The cash basis is now the default for self-employment income from 2024 to 2025 onwards. Cash basis fits MTD’s quarterly model better and is what most sole traders default to.

Will the due dates for paying tax change under MTD?

No. The due dates for paying income tax don’t change. The Final Declaration deadline is still 31 January, and payments on account are still 31 January and 31 July. What changes is the reporting cadence (four quarterly updates plus the Final Declaration), not the payment cadence. HMRC’s running quarterly estimate is informational, not a payment trigger.

How to prepare for HMRC MTD income tax changes

Five things to get done before April 2026:

1. Check your qualifying income. Pull your 2024 to 2025 Self Assessment figures (filed by 31 January 2026) and add up sole-trade turnover plus UK property gross income. Use our MTD threshold checker.
2. Pick MTD-compatible software. Get something HMRC-recognised for ITSA, not just for VAT. See our software comparison.
3. Set up digital records from 6 April 2026. Open a fresh accounting period in your software on the first day of the tax year. Don’t wait for the first quarterly update deadline.
4. Sign up for MTD ITSA. HMRC opens the sign-up service in the months before mandation. You can’t be auto-enrolled – it’s an active sign-up.
5. Diary your four quarterly deadlines. 7 August, 7 November, 7 February, 7 May for a standard tax year. Late filing costs one penalty point per quarter.

If you’re an accountant prepping a client list, see our MTD for accountants practice guide. If you’re a sole trader still working out where you stand, start with MTD for sole traders.

Where to get the official HMRC MTD information

HMRC’s main collection page sits at gov.uk/government/collections/making-tax-digital-for-income-tax. The campaign hub at makingtaxdigital.campaign.gov.uk has plain-English overviews. Detailed technical guidance for software developers is at developer.service.hmrc.gov.uk. The Income Tax (Digital Requirements) Regulations 2021 are on legislation.gov.uk as SI 2021/1076.

For ongoing changes, HMRC publishes update notices in the Treasury’s Spring Statement and Autumn Statement each year. We track every announcement on this page – check back, or see our MTD timeline for the full set of dates.

Quick answers on HMRC MTD income tax changes

What is MTD for Income Tax in plain English?

It’s HMRC’s replacement of the annual Self Assessment tax return for sole traders and landlords with quarterly digital updates plus a year-end Final Declaration, starting 6 April 2026 for those over £50,000.

Are HMRC’s MTD income tax changes definitely happening in 2026?

Yes. The April 2026 start date is in primary legislation and the Income Tax (Digital Requirements) Regulations 2021 (SI 2021/1076), as amended in 2024. HMRC has confirmed it through the Autumn Budget 2024 and the Spring Statement 2025.

Do I need MTD software if I’m already on Self Assessment?

You need MTD-compatible software from 6 April 2026 if your qualifying income from self-employment or property is over £50,000 in 2024 to 2025. Spreadsheets work if you pair them with bridging software. Pen-and-paper records won’t.

What happens if I don’t sign up for MTD on time?

HMRC issues a penalty point for each missed quarterly update, with a £200 fine once you hit the points threshold (4 points for quarterly filers). You’re also exposed to interest on any underpaid tax from 31 January.

Can I opt out of MTD for Income Tax?

Only if you qualify for a digital exclusion (no internet, religious objection, certain disabilities) or if your qualifying income drops below the threshold for three consecutive tax years. HMRC reviews exclusion claims case by case.