MTD for Income Tax: what changes in 2026 and how to get ready now

From April 2026, many sole traders and landlords will start sending quarterly updates to HM Revenue and Customs through approved software. This is part of Making Tax Digital for Income Tax, a long-planned shift to digital record keeping and more frequent reporting.

If you earn above the first threshold, you will be required to join from the 2026 to 2027 tax year. If you fall just below, you can still opt in early to get the benefits and smooth your learning curve. Either way, a calm, early setup will save stress later.

This guide explains who is in scope, what you must send and when, what software to use, and how to prepare in the next 90 days. You will also see how The Paperwork Team can reduce admin time and errors with three clear support tiers.

What is Making Tax Digital for Income Tax in 2026

Making Tax Digital for Income Tax Self Assessment (often shortened to MTD for ITSA) is HMRC’s programme that requires digital records and quarterly submissions for individuals with business or property income. From April 2026:

• Sole traders and landlords with more than £50,000 in combined business and property income must comply.
• Those with £30,000 to £50,000 are not mandated in 2026, but are encouraged to start early so the eventual switch is painless.

You will send quarterly updates, keep digital records, and complete an End of Period Statement for each business or property source after the year end, followed by a final declaration that replaces the old single Self Assessment return.

Is it mandatory and who must register

From April 2026 it is mandatory for individuals with total qualifying income above £50,000. Qualifying income is the gross turnover from self-employment and rental income before expenses. HMRC will confirm how and when to sign up, but you should plan your software and record keeping now.

Those between £30,000 and £50,000 are not mandated in April 2026. Early adoption can still help you build good habits, reduce surprises, and spread the learning across a few quarters rather than cramming it into one deadline. If your income varies and could exceed £50,000, setting up early is sensible.

MTD for ITSA applies to Self Assessment. You will still have a year-end process, but the format changes to quarterly updates plus an End of Period Statement and a final declaration.

What you will need to submit and when

A typical year under MTD for ITSA looks like this:

• Keep digital records for all business and property transactions.
• Send four quarterly updates to HMRC through compatible software. These are summary totals of income and expenses for the quarter.
• After the tax year, complete the End of Period Statement to finalise each business or property’s figures with year-end adjustments where needed.
• Submit a final declaration to bring together everything that affects your tax for the year, such as employment income, bank interest, and personal allowances.

Exact filing dates can vary, but quarterly updates will fall a month after the quarter end. The final declaration will have a deadline after the tax year end. Penalties can apply for missing deadlines or sending inaccurate returns, so build a routine you can keep.

Choosing software and setting up digital records

Pick software that is on HMRC’s list of compatible tools, can connect bank feeds, and supports easy receipt capture. Xero, QuickBooks, Sage, and FreeAgent are well known options. Look for:

• Bank feeds that import transactions daily so nothing is missed.
• A mobile app for snapping receipts at the point of purchase.
• Simple rules for categorising repeat transactions, for example fuel or software subscriptions.
• Clear reports so you can check each quarter before you submit.

If you want a foundation in practical bookkeeping that works well with cloud tools, our essential guide to xero bookkeeping covers everyday workflows from bank rules to reconciliations. You can read it here.

A practical 90-day action plan

Week 1 to 2: choose and set up software

• Select an HMRC-compatible package and create your organisation file.
• Turn on bank feeds and connect all business accounts. If you use one card for both business and personal, make a plan to separate spending.
• Add a receipt-capture app and test it with a few purchases.

Week 3 to 4: tidy opening balances

• Bring your records up to the current month. Reconcile bank accounts so the software matches your statements.
• Create simple categories for your common costs and link VAT codes where relevant.
• Set up bank rules for repeating transactions such as fuel, software, or insurance.

Week 5 to 8: build the monthly routine

• Snap every receipt as you buy. Attach it to the transaction in your software.
• Reconcile weekly in 10 to 15 minutes so you never face a backlog.
• Review a simple profit and loss each month to spot odd postings.

Week 9 to 12: run a mock quarter

• Close a three-month period in your software and prepare a mock quarterly update.
• Fix gaps, re-categorise errors, and write a one-page checklist for your next quarter.
• If you have a property business and a sole trade, practice creating separate summaries for each source.

This approach spreads the workload and helps you meet MTD standards before they are mandatory.

How The Paperwork Team can help

We offer three tiers so you can choose the right level of support and cost:

• Guided Self-Service: you run day to day tasks with our setup and check-ins. Clients typically save 5 to 7 hours a month and see error rates drop by around a third once rules and routines are in place.
• Shared-Control: we split responsibilities. You capture receipts and raise sales, we reconcile, review, and prepare the quarterly update pack. This often saves 8 to 12 hours a month and halves common mistakes such as duplicate entries or mis-coding.
• Full Management: we handle bookkeeping, quarterly updates, and year-end packs, with you approving submissions. Owners regularly report 12 to 20 hours back each month and far fewer late-night admin sessions.

If you prefer to outsource routine finance work to a steady team, explore our outsourced bookkeeping service here.

Penalties, agents, and what your accountant can do

Penalties can apply for late quarterly updates, late End of Period Statements, late final declarations, and for inaccuracies. HMRC uses points for late submissions that can build into fines. The exact amounts can vary by behaviour and delay, so it pays to build reliable habits early.

An agent or accountant can manage MTD tasks for you if you authorise them through HMRC. Many owners choose a hybrid model where they capture receipts and we do the checks and submissions. If you need support with Self Assessment returns while you prepare for quarterly updates, see our help with self assessment and filing options here.

Frequently asked questions

• What is Making Tax Digital for Income Tax 2026?
  It is HMRC’s move to digital records and quarterly submissions for individuals with business or property income, starting with those earning more than £50,000 from April 2026.

• Is Making Tax Digital mandatory?
  Yes, from April 2026 for qualifying individuals with income above £50,000. Those with £30,000 to £50,000 are encouraged to start early even though they are not mandated in 2026.

• Who has to register for Making Tax Digital?
  Sole traders and landlords with total business and property income above £50,000 will need to sign up for the 2026 to 2027 tax year. If you expect to cross the threshold, prepare now.

• Does it apply to Self Assessment?
  Yes. It changes how you report Self Assessment income and expenses by adding quarterly updates, an End of Period Statement, and a final declaration.

• Can my accountant do MTD for me?
  Yes. Once authorised, your accountant or a bookkeeping team can keep records compliant and submit on your behalf.

• What is the penalty for Making Tax Digital?
  HMRC will apply points and penalties for late or missing submissions and fines for inaccuracies. Amounts depend on lateness and behaviour. The best defence is a repeatable process and timely records.

Next steps

Getting ready over the next three months will remove pressure and make 2026 routine rather than a rush. Choose your software, turn on bank feeds, capture every receipt, and run a mock quarter before summer ends. If you want a partner to set this up and stand behind your numbers, book a short discovery call to match the right tier and secure an onboarding slot. If you would rather hand everything over, our team can manage the full process so you stay focused on customers while staying compliant.

For broader finance support alongside MTD readiness, you can also learn how our Virtual Finance Office helps with VAT returns, management accounts, and cash flow.