Making Tax Digital for Self-Employed People: What to Do in 2026

Making Tax Digital for self-employed people now applies to some UK sole traders and landlords. If your combined qualifying income from self-employment and property was more than £50,000 in the 2024/25 tax year, you will normally need to use Making Tax Digital for Income Tax from 6 April 2026.

This article explains how to check whether the rules apply to you, what HMRC means by qualifying income, which digital records and software you need, and when your quarterly updates are due. It is written for sole traders, freelancers, contractors, landlords and self-employed professionals who want a clear list of what to do next.

HMRC requires affected sole traders and landlords to maintain digital records, send quarterly summaries through compatible software and submit their annual tax return using that software. Check HMRC’s current MTD eligibility rules and phased start dates.

Making Tax Digital requires affected sole traders and landlords to keep digital income and expense records, send quarterly summaries through compatible software and submit one annual tax return through that software. It does not create four separate tax returns or four new tax-payment dates.

The main practical change is that your records need to be kept up to date during the year. A once-a-year exercise based on old bank statements, loose receipts and missing invoices is unlikely to work well under MTD.

What changes under MTD?

If MTD applies to you, you or an authorised agent will need compatible software to:

• Create, store and correct digital records of business and property income and expenses
• Send quarterly updates to HMRC
• Add other income, gains and relevant year-end information
• Submit the annual tax return through compatible software

HMRC describes quarterly updates as summaries of self-employment and property income and expenses. They are not complete tax returns.

What stays the same?

You still need to review your full tax position at the end of the year. This includes adding other income, checking the figures, making any necessary adjustments and claiming relevant allowances or reliefs.

Your Self Assessment payment timetable also remains in place. MTD does not, by itself, require you to pay Income Tax every quarter.

Who Must Use MTD for Income Tax and When?

MTD is being introduced in stages. Your start date depends on the amount of qualifying income shown for the relevant tax year, not simply on whether you describe yourself as a small business.

These thresholds relate to gross qualifying income before expenses. A business can therefore have taxable profit below the threshold and still fall within MTD.

Which types of income are affected?

The rules mainly apply to individuals who receive qualifying income from:

• A sole-trader business
• Freelance or contract work treated as self-employment
• UK or foreign property letting reported through Self Assessment
• More than one self-employed business
• A combination of self-employment and property income

Partnerships do not currently enter MTD for Income Tax as partnerships. An individual partner may still be affected by separate sole-trader or property income they receive outside the partnership.

These rules concern individuals with self-employment or property income. Income received through a limited company is not treated as sole-trader income for this MTD test.

What if HMRC has not written to you?

HMRC may contact people it believes are affected, but a missing letter does not confirm that you are outside the rules. You should still check the relevant Self Assessment return and calculate your qualifying income.

If your figures suggest that MTD applies but you have not heard from HMRC, use the official eligibility guidance or ask your accountant or tax agent to review the position.

Can you be exempt?

Some exemptions apply automatically. Others require an application to HMRC.

Digital exclusion may apply where it is not reasonable for a person to use compatible software because of factors such as age, disability, religious beliefs or lack of suitable internet access. HMRC considers the individual circumstances rather than applying one broad test.

Having only a few transactions, being unfamiliar with software or facing additional cost will not necessarily be enough on its own. Anyone granted an exemption must continue meeting their wider Self Assessment responsibilities. Read HMRC’s guidance on MTD exemptions.

What Is Qualifying Income for Making Tax Digital?

Qualifying income is broadly your gross income from self-employment and property before expenses are deducted. HMRC normally uses information from a previous Self Assessment return to decide whether the relevant MTD threshold has been exceeded.

This is one of the most common areas of confusion. Qualifying income is not the same as profit, taxable income or the amount you take home.

Gross income versus profit

Gross income is the amount received before deducting business expenses. Profit is what remains after allowable costs and any relevant adjustments have been taken into account.

For MTD eligibility, the starting figure is gross qualifying income. Use HMRC’s qualifying-income guidance when checking which amounts count.

Income that normally counts

Depending on your circumstances, qualifying income may include:

• Gross income from one sole-trader business
• Gross income from several separate sole-trader businesses
• UK property income
• Relevant foreign property income reported through UK Self Assessment
• Your applicable share of jointly owned property income
• A combination of self-employment and property income

If you have more than one relevant source, the gross figures are usually added together when checking the threshold.

Income that does not normally count

HMRC’s current guidance states that the following do not normally form part of qualifying income for this test:

• Employment income taxed through PAYE
• An individual partner’s share of partnership profit
• Dividends, including dividends from your own company
• State Pension income
• Private pension income

These amounts may still need to be included on your annual tax return. They are simply treated differently when deciding whether the MTD qualifying-income threshold has been exceeded.

Illustrative example: turnover above the threshold

Illustrative example only: A self-employed designer receives £54,000 of business income and has £18,000 of business expenses.

• Gross business income: £54,000
• Business expenses: £18,000
• Illustrative profit before other adjustments: £36,000
• Qualifying income for the MTD test: £54,000

The relevant figure is £54,000 because the threshold test is based on gross income before expenses.

Illustrative example: combining business and property income

Illustrative example only: A consultant receives £32,000 of self-employment income and £21,000 of gross property income.

Neither source is above £50,000 by itself. Together, however, the qualifying income is £53,000.

What about jointly owned property?

Your share of income from jointly owned property will normally be considered. The amount depends on how the income is allocated and reported.

For example, where two people are each entitled to half of £50,000 of gross property income, each person’s starting qualifying amount would generally be £25,000.

What if a business or property source has stopped?

The treatment can depend on when the source stopped and what was shown on the relevant tax return. A ceased source may still affect the calculation if another qualifying business or property source continues.

If all relevant sources have ended, HMRC should be told so its records can be updated. Do not assume that a ceased business will automatically disappear from the MTD position without being reported correctly.

Making Tax Digital Deadlines for 2026/27

For people who entered MTD on 6 April 2026, the first quarterly update is due by 7 August 2026. Further updates are due in November, February and May.

The annual 2026/27 tax return is due by 31 January 2028.

The 2025/26 return is still submitted under the normal Self Assessment process by 31 January 2027. The first annual return submitted through MTD software is the 2026/27 return, due by 31 January 2028.

Standard and calendar update periods

You can use standard tax-year periods or calendar periods, depending on the software setup and the choice made.

Each update is cumulative. The November update, for example, includes figures from the beginning of the relevant annual period through to the end of September or 5 October. It is not limited to the latest three months. Check HMRC’s quarterly update periods and deadlines.

What happens if you miss a 2026/27 quarterly update?

HMRC says penalty points will not be applied for late quarterly updates during 2026/27. The update still needs to be submitted, particularly because outstanding updates can prevent the annual return from being completed properly.

The first-year concession does not remove penalties for a late annual tax return or late payment of tax. After the 2026/27 year, late quarterly updates can count towards the MTD penalty-points system. Review HMRC’s MTD penalty guidance.

Not Sure Which MTD Deadline Applies to You?

Message Accounteezy if you would like help checking your qualifying income, current records or next quarterly deadline.

Ask Accounteezy on WhatsApp

What Records Must Self-Employed People Keep Digitally?

Affected taxpayers must create digital records of relevant self-employment and property income and expenses. Each record should include the amount, the date and the appropriate income or expense category.

Your software uses these entries to calculate the category totals included in each quarterly update. Poor records will therefore affect both the update and the annual return that follows.

Digital income records

Your income records may include:

• Sales invoices
• Client payments
• Cash sales
• Online marketplace sales
• Payment-platform reports
• Rental income
• Refunds and credit notes
• Other business receipts

Digital expense records

Expense records may cover:

• Stock and materials
• Office costs
• Software subscriptions
• Professional fees
• Travel and vehicle costs
• Advertising and marketing
• Telephone and internet costs
• Repairs and property costs
• Other business expenses

A digital entry does not remove the need to keep evidence. Retain invoices, receipts, bank statements, mileage records and other documents that support the figures reported.

Where a payment includes both personal and business expenditure, keep enough information to show how the business amount was calculated. The correct treatment may depend on the type of expense and how it was used.

For a broader record-keeping routine, read Accounteezy’s sole trader bookkeeping guide.

More than one sole-trader business

If you run more than one sole-trader business, keep the transactions separate. HMRC requires separate digital records and quarterly updates for each source of self-employment income.

For example, someone who works as both an electrician and a driving instructor should not combine both trades into one undifferentiated quarterly update.

More than one UK rental property

Several UK properties are normally treated as one UK property business for these reporting purposes. Separate quarterly updates are not usually required for every individual property.

Your underlying records should still be detailed enough to identify the income and costs relating to each property. This becomes important when a property is sold, starts or stops being let, is jointly owned or has expenses that require separate review.

Can you use spreadsheets for MTD?

Yes. A spreadsheet can remain part of your record-keeping process if compatible bridging software connects it to HMRC and supports the required submissions.

The full setup should allow you to:

• Maintain the required digital links
• Send quarterly updates
• Correct errors without breaking the digital record
• Submit the annual return directly or through another compatible product

If a transaction is wrong, correct it in the original spreadsheet or bookkeeping record rather than overwriting only the final total in the bridging software. That gives you a clearer audit trail and reduces the chance of the same error returning in a later update.

Read HMRC’s digital-record requirements.

If regular record keeping is becoming difficult to manage, see Accounteezy’s bookkeeping services for UK small businesses.

What MTD Software Do Sole Traders Need?

Your software must support the income sources and submissions relevant to your circumstances. A product described as “MTD-ready” may support MTD for VAT without supporting MTD for Income Tax, so check the exact service before subscribing.

HMRC’s software finder allows you to filter recognised products according to your income sources, accounting period and record-keeping method. Recognition means the product has completed HMRC’s relevant process; it does not mean HMRC recommends one provider over another.

What your software should be able to do

Your chosen product, or combination of connected products, should be able to:

• Create digital records or connect to existing records
• Support every relevant self-employment and property income source
• Send quarterly updates
• Add other income and gains needed for the annual return
• Submit the annual tax return
• Work with your chosen update periods
• Allow suitable accountant or bookkeeper access where required
• Work alongside your VAT system if you are VAT registered

All-in-one software or bridging software?

Is free MTD software available?

HMRC says free software is available for some people with simple tax affairs. Free plans may have limits on transactions, supported income sources or annual-return functions.

Check the complete product specification before relying on a free option. Software that can send a quarterly update may not support all the information required for your annual tax return.

Questions to ask before choosing software

1. Is the product recognised for MTD for Income Tax?
2. Does it support all my self-employment and property income sources?
3. Can it send quarterly updates?
4. Can it submit my annual tax return?
5. Can it report employment, savings, dividends or other year-end income?
6. Does it support more than one sole-trader business?
7. Can it connect properly to my spreadsheet or current accounting records?
8. Can my accountant or bookkeeper access it?
9. Does it meet my MTD for VAT needs, if relevant?
10. Are important functions excluded from the free or basic plan?

Do not choose software only on price. A cheaper product can become costly if it does not support your income sources, cannot handle the annual return or requires significant manual correction.

Search HMRC-recognised MTD for Income Tax software.

How to Sign Up for Making Tax Digital

Check your eligibility and software before signing up. Do not assume that receiving an HMRC letter means every part of the setup has been completed for you.

Before you sign up

1. Check your qualifying income. Use the correct tax return and combine relevant self-employment and property income.
2. Confirm your start date. Work out whether you fall into the April 2026, 2027 or 2028 group.
3. Consider any exemption. Apply before your required start date where an application is needed.
4. Choose compatible software. Check every income source and submission requirement.
5. Decide who will manage the process. You can deal with MTD yourself or appoint an authorised agent.

What you need to sign up

You must be registered for Self Assessment. HMRC’s current guidance also states that you must have submitted a Self Assessment return during the previous two years.

The sign-up process may require:

• The tax year in which you will begin using MTD
• Your business or property-income start date
• Your business name
• Your business address
• The nature of your trade
• Your relevant self-employment and property income sources

If an accountant or tax agent is acting for you, they can use the agent process to complete the registration.

After signing up

Registration is only one part of the process. You or your agent must still:

• Connect and authorise the selected software
• Check that the correct businesses and property sources appear
• Confirm the update periods
• Begin or continue creating digital records
• Submit any quarterly updates that are already due

Check the software connection well before the deadline. Login issues, incorrect business details and missing authorisation can take time to resolve.

Follow HMRC’s MTD sign-up guidance.

How to Prepare Your First MTD Quarterly Update

A quarterly update is produced from the digital records in your software. Before submitting it, check the reporting period, income sources, transactions and category totals.

You do not need to make all year-end accounting or tax adjustments before sending a quarterly update. HMRC receives category totals rather than copies of individual invoices and receipts.

1. Confirm the correct update period

Check whether you are using standard tax-year periods or calendar periods. Your first cumulative update will normally cover:

• 6 April to 5 July under standard periods, or
• 1 April to 30 June under calendar periods

Both are due by 7 August.

2. Record all business income

Check that your records include all relevant income, including amounts that did not pass through your main business bank account.

• Paid sales invoices
• Cash sales
• Marketplace sales
• Payment-platform income
• Rental income
• Refunds or adjustments
• Income paid into a personal account

Take care with payment processors and online marketplaces. A bank deposit may be the net amount after fees, while your records may need to show the gross sale and the fee separately.

3. Record business expenses

Enter expenses using consistent categories. Each entry should include the correct amount and date.

If the tax treatment is unclear, record the transaction accurately and flag it for review. Do not force it into an unsuitable category simply to complete the quarterly update.

4. Reconcile the records

Compare your digital records with:

• Business bank statements
• Credit-card statements
• Invoices
• Receipts
• Payment-platform reports
• Marketplace statements
• Property-agent statements

Reconciliation can uncover duplicated transactions, missing sales, incorrect amounts and payments entered in the wrong category.

5. Review each business separately

If you have several sole-trader businesses, make sure each transaction has been assigned to the correct trade. Separate businesses require separate quarterly updates.

6. Check the category totals

Review the cumulative totals produced by the software. A figure that looks unusually high or low may indicate:

• A duplicated bank feed
• A missing month
• Personal transactions included as business expenses
• Income recorded as an expense
• A platform payout recorded without the underlying sale
• Transactions assigned to the wrong business

7. Submit and retain confirmation

Send the update through compatible software and keep the submission confirmation. Check that the next deadline shown in the software is correct.

HMRC may provide an estimated tax position after an update. Treat this as an estimate rather than a final tax bill. Year-end adjustments, reliefs, other income and later corrections may change the final amount.

Accounteezy’s small-business bookkeeping guide explains the monthly routines that help prevent missing records and reconciliation problems.

Common Making Tax Digital Mistakes

Most problems arise from an incorrect eligibility calculation, incomplete records or software that does not fit the business. These issues are easier to correct before several update periods have passed.

Using profit instead of turnover

The threshold is based on gross qualifying income. A sole trader with £55,000 of turnover and £25,000 of expenses does not use £30,000 as the MTD eligibility figure.

Waiting for an HMRC letter

HMRC may contact affected taxpayers, but you are still responsible for checking your own position.

Treating every update as a tax return

A quarterly update is a cumulative summary of income and expense categories. It does not replace the annual return.

Assuming tax must be paid quarterly

MTD does not create four new Income Tax payment dates. An estimate shown after an update is not automatically an amount due for immediate payment.

Using a spreadsheet without bridging software

A spreadsheet is acceptable only when it forms part of a compatible digital system capable of making the required submissions.

Choosing software that covers only part of the process

Check that the product supports both quarterly updates and the annual tax return. It must also handle each income source you need to report.

Forgetting property income

Self-employment and property income are normally combined when checking the qualifying-income threshold.

Combining separate trades into one update

Different sole-trader businesses require separate records and quarterly updates.

Ignoring the deadline because first-year penalties are suspended

The 2026/27 concession removes penalty points for late quarterly updates. It does not remove the requirement to submit them.

Assuming MTD for VAT software also covers Income Tax

MTD for VAT and MTD for Income Tax have different requirements. Confirm that the product supports both services where necessary.

Do You Need an Accountant or Bookkeeper for MTD?

You do not have to appoint an accountant or bookkeeper simply because MTD applies. Professional support may still be useful where records are behind, several income sources are involved or responsibility for the software and submissions is unclear.

Self-managing may be practical when

• You have one straightforward sole-trader business
• Your transaction volume is manageable
• Your records are already kept up to date
• You understand the difference between turnover and profit
• You are comfortable reconciling accounts
• Your software supports your full tax position
• You can monitor each deadline

Professional support may be useful when

• You run several sole-trader businesses
• You receive both business and property income
• Your bookkeeping is incomplete or several months behind
• You are moving from paper records or an unsuitable spreadsheet
• You are VAT registered as well as using MTD for Income Tax
• You are unsure which income counts towards the threshold
• Your first quarterly deadline is close
• You need help with annual adjustments, reliefs or other income

Agree the division of responsibility before work begins. For example, confirm who records transactions, who reviews bank reconciliations, who submits quarterly updates and who completes the annual return.

Regular digital records are usually a bookkeeping responsibility. For the annual return and wider Self Assessment work, review Accounteezy tax return services. Businesses that need broader reporting or accounts support can also explore Accounteezy accounting services.

MTD Readiness Checklist for Self-Employed People

Work through the checklist in order. Eligibility should be confirmed before you buy software or prepare a quarterly update.

• Check the qualifying income shown on the relevant Self Assessment return
• Add together relevant self-employment and property income
• Use gross income before expenses, not profit
• Confirm whether your start date is April 2026, 2027 or 2028
• Check whether an automatic or application-based exemption applies
• Choose software recognised for MTD for Income Tax
• Confirm the software supports all your income sources
• Check that the software can submit your annual tax return
• Sign up for MTD where required
• Authorise the software to connect with HMRC
• Confirm your update periods
• Create digital records for each separate business
• Record the amount, date and category of each transaction
• Reconcile bank and payment-platform records
• Review cumulative category totals
• Send the quarterly update by the relevant deadline
• Keep submission confirmations and supporting records
• Add other income and year-end adjustments before the annual return

Need Help Getting Your Bookkeeping Ready for MTD?

Ask the Accounteezy team on WhatsApp if you would like help checking your records, qualifying income or next quarterly update.

Message Accounteezy on WhatsApp
Request a clear quote for ongoing bookkeeping or tax-return support

General-information disclaimer: This article provides general information and does not replace tax, accounting, legal or financial advice based on your individual circumstances.

FAQs About Making Tax Digital for Self-Employed People

When does Making Tax Digital start for self-employed people?

MTD for Income Tax started on 6 April 2026 for sole traders and landlords whose qualifying income was more than £50,000 in 2024/25. It starts on 6 April 2027 for qualifying income over £30,000 in 2025/26 and on 6 April 2028 for qualifying income over £20,000 in 2026/27.

What is qualifying income for MTD?

Qualifying income is gross income from self-employment and property before expenses are deducted. Relevant income from several businesses and properties may need to be combined.

Does MTD mean submitting four tax returns a year?

No. Quarterly updates are summaries of cumulative income and expense totals, not complete tax returns. You still submit one annual tax return after checking the full figures and adding other income, gains, reliefs and adjustments.

Can sole traders continue using spreadsheets for MTD?

Yes, provided the spreadsheet connects to compatible bridging software that can make the required HMRC submissions. The complete setup must maintain the required digital links and support the work needed at year end.

Is free MTD software available?

Free products may be available for people with simple tax affairs. Check transaction limits, income-source support and annual-return functions before choosing one.

Do I still submit a Self Assessment tax return under MTD?

Yes. You will use compatible software to complete and submit one annual tax return. Other income, gains, corrections, allowances and reliefs still need to be included where relevant.

Do I have to pay tax every quarter under MTD?

No. MTD does not change the normal Self Assessment payment timetable. An estimate shown after a quarterly update is not a new quarterly tax bill.

Can I apply for an exemption from MTD?

Some exemptions are automatic and others require an application. Digital exclusion may apply where using compatible software is not reasonable because of the person’s circumstances, but unfamiliarity or additional cost alone will not necessarily qualify.

Final Recommendation

If the Making Tax Digital rules apply to your self-employed or property income, begin with the qualifying-income calculation. Once your start date is clear, choose software that supports your full circumstances and organise the records needed for the next update.

The software is only part of the process. Accurate digital records, consistent categories and regular reconciliations are what make the quarterly updates and annual return reliable.

Where ongoing records are the main problem, regular bookkeeping support is the sensible starting point.