Guide · 19/09/2026

Making Tax Digital for Income Tax: who is in, what counts as a digital record

Quarterly updates started on 6 April 2026 above £50,000, with £30,000 and £20,000 to follow. What the rules actually demand of your bookkeeping.

Making Tax Digital for Income Tax is no longer a consultation document. For the first group of sole traders and landlords it began on 6 April 2026, and the first quarterly update of the new regime fell due in August. Here is the practical shape of it, without the jargon.

The dates and the thresholds

• From 6 April 2026: sole traders and landlords whose qualifying income was more than £50,000 in the 2024 to 2025 tax year.
• From 6 April 2027: the threshold drops to more than £30,000, measured on 2025 to 2026.
• From 6 April 2028: more than £20,000, measured on 2026 to 2027.

Qualifying income is total receipts from self-employment and property before expenses — not profit. Two small businesses that each turn over £30,000 are inside the rules from 2027 even if neither makes much money. HMRC's own eligibility guidance sets out how the test works, and it is the taxpayer's job to check — a letter from HMRC is a courtesy, not a precondition.

Once you are in, the shape of the year changes. You keep digital records, send a quarterly update for each self-employment and property business, and finish with a final declaration by 31 January. Quarterly deadlines fall one month and two days after each period ends: for standard quarters that means 7 August, 7 November, 7 February and 7 May. Each update is cumulative — it runs from the start of the tax year — so a correction can be made in the next update rather than by resubmitting.

Who is outside it

Companies are not affected; this is income tax, not corporation tax. Partnerships have not been brought in yet. Exemptions exist where using digital tools is unreasonable or impractical — age, disability, health, location without reliable internet, or religious grounds — but exempt taxpayers still file a Self Assessment return in the ordinary way.

Penalties for the first year are deliberately soft: HMRC's penalties guidance confirms there are no penalties for missing a quarterly update deadline in 2026 to 2027. After that, each missed deadline earns a point, and four points bring a £200 penalty. Late payment is treated separately and starts to bite from day 16.

What the accounting system has to do

The requirement is not "use an app". It is that the record itself lives in software, and that the figures reaching HMRC were not retyped on the way.

• Record each transaction digitally with the amount, the date income was received or the expense incurred, and the category. Original invoices and bank statements are kept as before, but the running record has to be digital.
• Keep a digital link end to end. Spreadsheets are allowed, but they must connect to compatible software through linked cells, CSV or XML import and export, or an API. Copying a total and pasting it into the submission screen breaks the chain.
• Separate the businesses. A trade and a rental property are distinct sources and update separately, so the ledger needs to tag every entry to the right one from the start.
• Submit cumulatively and re-submit cleanly. The software should be able to restate the year-to-date position after a late invoice or a corrected category.
• Retain the records for at least five years after the 31 January submission deadline for that tax year.

A sensible order of work

1. Check qualifying income against the threshold for your start year — on receipts, not profit. 2. Confirm your software is on HMRC's recognised list and that the link from any spreadsheet is a real digital link, not a retyped total. 3. Clean up categorisation before the quarter you must report, not during it. Most of the pain in year one comes from uncategorised bank lines, not from the submission itself. 4. Put the four quarterly dates and the 31 January declaration in the same calendar as VAT. 5. Use the 2026 to 2027 penalty holiday to rehearse the whole cycle, including a deliberate correction, while mistakes are free.

This article is general information and not legal or tax advice; your own circumstances may differ.