Making Tax Digital 2026/27 — Income Tax & Quarterly Updates

Making Tax Digital (MTD) for Income Tax is HMRC's digital way for eligible sole traders and landlords to keep records, send quarterly updates and submit their Self Assessment tax return. It does not remove the annual tax return or change the normal 31 January payment deadline. Use the MTD Calculator→ to model the reporting cycle, but confirm unusual income positions with HMRC or an adviser.

Who must use MTD and when

You are generally in scope when you are an individual registered for Self Assessment, receive income from self-employment or UK property, and your qualifying income is above the relevant threshold. Qualifying income is the combined turnover from self-employment and property income before expenses, based on the previous year's tax return. Other income is not included in that threshold test.

The £20,000 phase is the current HMRC timetable; an older £10,000 claim is not current. The threshold is turnover, not profit: £35,000 rent and £10,000 expenses is £35,000 qualifying property income for this test. A person can still be outside MTD because of an exemption or because their income sources and filing position do not meet the other conditions.

What you need to do

You need compatible software to create and store digital records of relevant self-employment and property income and expenses, send quarterly updates and submit the tax return. If you use more than one product, HMRC requires the relevant records to be digitally linked. Spreadsheets can be part of the process when used with compatible bridging software; paper supporting documents still need to be retained where they support the tax return.

Quarterly updates are summaries of income and expenses, not tax returns. Each update covers the tax year from its start to the end of that update period, so later updates can correct earlier records. You still need to make adjustments, include other income or gains and submit the annual Self Assessment tax return.

2026/27 standard update periods

Calendar update periods are also available for a business whose accounting period aligns with 1 April to 31 March. The deadlines remain 7 August, 7 November, 7 February and 7 May. Check the accounting period and software setup before sending the first update.

Annual return and payment

MTD adds digital records and quarterly updates; it does not turn the quarterly update into the final tax calculation. You must still use compatible software to finalise the Income Tax position, make relevant adjustments and report other income sources before submitting the annual Self Assessment tax return. The tax return and tax payment remain due by 31 January after the end of the tax year. Payments on account can create an additional 31 July payment where the normal Self Assessment rules apply.

Exemptions

HMRC has automatic and application-based exemptions. Digital exclusion can be relevant where it is not reasonable or practical for a person to use digital tools because of age, disability, location, religious beliefs or another reason. Some exemptions are based on information HMRC already holds; others require an application. An exemption is not the same as being below a threshold, and an exempt person normally continues to report through Self Assessment.

Do not rely on a generic list of circumstances: check HMRC's current exemption guidance for the facts of your case. VAT insolvency exemption does not automatically create an MTD for Income Tax exemption.

Penalties and 2026/27 transition

For 2026/27, HMRC says it will not apply penalty points for late quarterly updates, but you still need to send them before submitting the tax return. For tax years after 2026/27, a missed quarterly update or tax-return deadline can add one late-submission point. Reaching the standard four-point threshold triggers a £200 penalty, with another £200 penalty for each later missed deadline while the threshold conditions apply.

The late-payment regime is separate from submission points. HMRC's current guidance sets out different first-year treatment and rates for 2026/27 and 2027/28, including a first-year 30-day period in relevant circumstances. Do not use a single “2% on day 15, 4% on day 30” table for every MTD taxpayer; check the tax year, payment type and current HMRC penalty guidance.

Moving from spreadsheets

1. Check the qualifying-income test against the relevant previous-year Self Assessment return.
2. Check whether an automatic or application-based exemption applies.
3. Choose software listed or recognised as compatible with MTD for Income Tax, and confirm that it supports your income sources.
4. Set up digital records and any required links between record-keeping and submission software.
5. Reconcile records before each update and keep the supporting documents needed for Self Assessment.
6. Send the four updates, then finalise and submit the annual tax return by 31 January.

There is no basis here for promising a particular provider price, time saving or “sandbox” test workflow. Software features, prices and onboarding steps vary, so check the provider and HMRC before choosing a product.

Test the threshold using the right income

The threshold test is not a profit test and it is not a test of the money left in the bank. Start with the previous-year Self Assessment return and identify the self-employment turnover and property income that HMRC says count. Add the relevant sources before expenses. Then check the tax year used for the start date. A person with several small sources can therefore be in scope even when no single source is above the threshold, while a person with other taxable income that is not qualifying income should not add it automatically.

Keep a copy of the calculation showing each source, the gross figure, the tax year and the return box or record used. If a return is amended, check whether the qualifying-income test changes and whether HMRC's start-date information updates. Do not use a current-year estimate to override the previous-year test unless the current HMRC guidance specifically tells you to do so. Income thresholds and implementation dates are policy facts that should be checked again before the first update.

Jointly owned property and multiple businesses need care. The income may be reported across people and businesses in a way that affects the qualifying-income test and the digital records required. Keep business records separate even when one software account contains them. Ask HMRC or an adviser how the sources should be represented if ownership, accounting periods or partnership arrangements make the return difficult to map.

What a quarterly update actually contains

A quarterly update is a cumulative summary of qualifying income and expenses for the relevant period. It is not a new tax return, a final tax calculation or a payment demand. Reconcile the digital records before sending it and keep the supporting invoices, bank records, property statements and adjustment notes. If an earlier total was wrong, the next cumulative update may correct the year-to-date position, but preserve the original evidence and the reason for the correction.

The annual finalisation still matters because the quarterly totals may need adjustments, reliefs, accounting choices, other income and information that cannot be completed in a simple update. A person can send every update on time and still submit an incorrect annual return. Conversely, a late or missing update is not repaired merely because the annual return is eventually filed. Treat quarterly compliance and annual filing as linked but separate tasks.

Plan the first reporting cycle

Before the first deadline, confirm the accounting period, the update period selected in the software, the connected HMRC authorisation and the business or property sources included. Run a test reconciliation from the source records to the software totals. Check how the software handles refunds, transfers, private-use adjustments, capital items and jointly owned property; do not assume that a category name means the same thing as a Self Assessment box.

Save the submission confirmation and the data sent to HMRC. If an agent submits updates, agree who retains the records, who reviews the totals and who monitors the deadlines. The legal reporting responsibility remains important even when a third party operates the software. A simple calendar with the four update dates, finalisation date and payment dates helps prevent the common mistake of treating a quarterly update deadline as the tax-payment deadline.

MTD, payment and exemption are separate decisions

MTD does not create a new payment schedule for the final liability. The normal Self Assessment payment rules continue, including a possible payment on account where those rules apply. Keep money aside using the final tax estimate and payment dates, not by assuming that sending a quarterly update settles the amount due. The MTD process may make income more visible during the year, but it does not itself confirm the final tax bill.

An exemption is also different from being outside the threshold. Someone below the qualifying-income threshold may not have the MTD obligation for that start date. Someone above it may apply for or receive an exemption because digital record keeping is not reasonable or practical. In either case, keep the evidence for the position and continue the correct Self Assessment reporting route. Do not stop filing solely because an exemption from MTD has been granted.

How to handle a change in circumstances

Review the position when a business starts or stops, a property is sold or let, a partnership changes, income moves between owners, or an accounting period changes. Check whether the change affects the qualifying-income test, the software setup, the update periods or the annual return. Keep the date and evidence of the change. If HMRC has already sent a sign-up notice, use the official service or contact route to query it rather than ignoring the notice.

If a software provider cannot support the required income source, do not silently use an incompatible workaround. Check HMRC's compatible-software information, ask the provider how digital links and corrections operate, and obtain advice if the arrangement is unusual. The cost and convenience of a product are secondary to whether it can preserve accurate records and submit the required data.

Frequently Asked Questions

Check your position with the MTD Calculator→, then read the Self Assessment Filing Guide and Record-Keeping Requirements guide.

Official sources

• HMRC — Use Making Tax Digital for Income Tax: before you use this guide — scope and preparation.
• HMRC — Making Tax Digital for Income Tax: send quarterly updates — update periods and submissions.
• HMRC — Making Tax Digital for Income Tax: create digital records — record keeping and digital links.
• HMRC — Find out if and when you need to use MTD for Income Tax — threshold and start-date tests.
• HMRC — Exemptions from MTD for Income Tax — automatic and application-based exemptions.
• HMRC — Penalties for MTD for Income Tax — late-update and late-payment treatment.
• HMRC — Choose compatible MTD software — software compatibility.

This guide is general educational information for UK Income Tax MTD rules and the 2026/27 tax year. HMRC's current guidance, the taxpayer's income sources, exemption status and Self Assessment records control the individual obligation. It is not a filing confirmation or tax advice.