What Is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is a new way of reporting your business income and expenses to HMRC using compatible software. If your total annual income from self-employment and property exceeds £50,000, you'll be required to use this system from April 2026. Instead of completing a single Self Assessment tax return each year, you'll submit quarterly updates digitally throughout the year.

Who needs to sign up?

You're required to use Making Tax Digital for Income Tax from 6 April 2026 if your total annual income from self-employment and property is over £50,000.

This applies to:

• Sole traders earning over £50,000 from their business
• Landlords with property income over £50,000
• Anyone with combined self-employment and property income over £50,000

Even if you're not required to join yet, you can sign up voluntarily to get familiar with the system before it becomes mandatory for you.

What Making Tax Digital involves

Making Tax Digital changes how you keep records and report to HMRC:

Digital record keeping: You must use software that works with Making Tax Digital for Income Tax to maintain your business records digitally.

Quarterly updates: Instead of reporting once a year, you'll send quarterly updates to HMRC about your income and expenses throughout the tax year.

Annual submission: You'll still need to submit a final tax return, but this will be done through your compatible software. Before submitting, you'll need to include other sources of income and gains in your software.

When to sign up

If you're required to use Making Tax Digital for Income Tax for the 2026 to 2027 tax year, you should sign up now. HMRC will check that you're eligible based on the details you provide.

Important: You still need to submit a Self Assessment tax return for the tax year before you start using Making Tax Digital for Income Tax.

Signing up voluntarily

You can sign up before you're required to if you want to prepare early. For example, if you'll be required to use it from 6 April 2027 based on lower income thresholds, you can sign up and volunteer now. If you do sign up voluntarily, you'll need to use compatible software to send any missed quarterly updates for the current year.

Before you sign up

Check if you're exempt: Some people may be exempt from Making Tax Digital for Income Tax. If you are exempt, you won't have to sign up.

Choose compatible software: You must have software that works with Making Tax Digital for Income Tax. Always check with the software provider to make sure their product will meet your needs.

Understand the requirements: Make sure you understand how to use the service, including creating digital records, sending quarterly updates and submitting your tax return.

Penalties to be aware of

If you're required to use Making Tax Digital from 6 April 2026, HMRC will not apply penalty points for late quarterly updates during the first tax year (2026 to 2027). However, penalties will still apply for late tax returns or if you pay your tax bill after the due date.

If you're signing up voluntarily, different penalty rules apply. HMRC will contact you to confirm when you've become liable for these penalties after you've signed up.

Eligibility requirements

To sign up for Making Tax Digital for Income Tax you must:

• Be registered for Self Assessment
• Have submitted a tax return in the last 2 years

What you'll need to sign up

When you sign up, you'll need to tell HMRC about your active sole trader and property income. Have the following information ready:

For all users:

• Your business start date or the date you started receiving property income (if within the last 2 tax years)
• Confirmation of the tax year you'll start using Making Tax Digital for Income Tax

If you're a sole trader, you'll also need:

• Your business name (the name you use on your invoices)
• Your business address
• The nature of your business (your trade)

If you have multiple self-employment income sources or property businesses, you'll need to check each one in the online service and add any that are missing.

How to sign up

You'll need to use the same user ID and password you received when you registered for Self Assessment.

You may be asked to provide further proof of your identity. You can do this by:

• Using an app on your mobile phone to match a photo of your face to your passport or driving licence
• Answering questions about information HMRC already holds about you (for example, passport, credit reference, driving licence, Self Assessment, latest P60, or a recent payslip)

Using an agent

If you use an accountant or tax agent, they can sign you up instead of doing it yourself.

What happens after you sign up

Once you've signed up, you'll need to start using your compatible software to:

• Keep digital records of your income and expenses
• Send quarterly updates to HMRC
• Submit your annual tax return when required

Online services may be slow during busy times, so check for any service issues if you experience problems.

Sources

• Sign up for Making Tax Digital for Income Tax
• Penalties for Making Tax Digital for Income Tax
• Find out if you can get an exemption from Making Tax Digital for Income Tax

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.